The price of the crude oil benchmarks moderated by about 3 per cent on Thursday on investor hopes for an end to the United States-Israeli war with Iran that could reopen the Strait of Hormuz, following a ceasefire deal between Israel and Lebanon.
Brent futures lost $2.78 or 2.84 per cent to trade at $95.03 per barrel, while the US West Texas Intermediate (WTI) crude declined by $2.98 or 3.1 per cent to close at $93.04 per barrel.
Israel and Lebanon said they have agreed to implement a ceasefire on Wednesday, raising hopes for a deal between the US and Iran. Iran has made any agreement conditional in part on an end to fighting between Israel and Hezbollah, an Iran-aligned group in Lebanon. However, Israeli strikes in southern Lebanon continued on Thursday.
Iran signalled that there has been “no tangible progress” in the talks with the Americans on a potential deal, while the Israel-Lebanon ceasefire announced by the United States overnight appears shaky.
“No tangible progress has been achieved in the negotiation process,” Iran’s Foreign Minister Abbas Araghchi was quoted as saying by the semi-official Iranian news agency Tasnim.
The US and Iran have been exchanging messages on a framework proposal for a potential agreement for weeks. The oil market has reacted to each signal or hint of a breakthrough with sell-offs that sent Brent Crude prices to below $100 per barrel last week.
Despite the market hopes, the positions of the two sides appear to remain very distant, and a re-opening of the Strait of Hormuz is not imminent.
Earlier this week, Iran targeted civilian infrastructure in Kuwait and Bahrain, and alarms were raised at US military bases in Saudi Arabia, as Iran responded to the Israeli offensive in Lebanon.
The Republican-led US House of Representatives approved a resolution to block President Donald Trump from continuing the war against Iran. To take effect, the resolution would need Senate approval and a two-thirds majority in both chambers to override an almost certain Trump veto.
The Organisation of the Petroleum Exporting Countries (OPEC) expects robust oil demand growth and is not changing its estimate, according to its Secretary General, Haitham Al Ghais, on Thursday.
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