The oil market gained nearly 1 per cent on Wednesday after US President Donald Trump said the new ceasefire agreement with Iran was not final and the Iran war could resume.
Brent crude futures appreciated by 59 cents or 0.75 per cent to trade at $79.55 a barrel, and the US West Texas Intermediate (WTI) crude futures rose 74 cents or 0.97 per cent to $76.79 per barrel.
President Trump said yesterday that a memorandum of understanding with Iran was not final, and that he could resume a bombing campaign if he did not like it or if Iran did not “behave”.
The US and Iran on Sunday said they had agreed on terms to end the war and reopen the Strait of Hormuz. Though not officially published, the widely reported draft grants the Islamic Republic the right to sell its oil on global markets immediately, alongside the prospect of significant further economic relief, indicating “Iran has emerged from the conflict in a stronger strategic position.
The provision for waiving sanctions on Iranian oil sales takes effect once the agreement is signed this week and also covers services including banking, transportation and insurance to facilitate the sales.
The details of the interim deal to end the war began to emerge on Tuesday, with US President Donald Trump saying it will rule out a nuclear weapon for Iran.
The deal would extend a tenuous ceasefire announced in April by another 60 days and reopen the Strait of Hormuz, which Iran has effectively blocked since the US and Israel first attacked Iran.
Iran effectively shut the Strait after the US and Israel launched attacks on Iran on February 28. The US military blockaded Iranian oil from coming out of the Strait of Hormuz, through which 20 per cent of the world’s oil and liquefied natural gas normally flows.
The US Energy Information Administration (EIA) said on Wednesday that US crude oil inventories fell for a 10th straight week last week as demand surged, pushing total stockpiles to their lowest level since 1985, as the Iran war continued to upend global energy markets.
In its first look at 2027, the International Energy Agency (IEA) said the oil market will enter a significant supply overhang, with global supply set to surge by 8 million barrels per day and demand rising by just 2 million.
In the near term, the agency said the Iran-US deal should provide an opportunity to replenish depleted inventories or build new strategic reserves.