Oil prices plummeted on Thursday to their lowest level since the US-Iran war, following an interim accord that improved global petroleum supply prospects.
According to Reuters, Brent crude futures slid $1.53, or 1.9 percent, to $78.02 per barrel at 1326 GMT, while US West Texas Intermediate (WTI) crude fell $2.22, or 2.9 percent, to $74.57 per barrel.
Brent crude reached its lowest level since the first trading session following the initial US-Israeli assaults on Iran, while WTI fell to its lowest level since early March.
Expectations of increasing Iranian oil shipments fueled market mood after Washington and Tehran inked a 14-point memorandum of understanding to de-escalate hostilities.
“The selloff extended as energy markets continued to aggressively price in a faster-than-expected return of Iranian barrels following the recent U.S.-Iran memorandum of understanding,” said IG market analyst Tony Sycamore.
The accord sets up a 60-day negotiating period in which Iran will allow toll-free transit through the Strait of Hormuz, one of the world’s most important oil and gas shipping routes.
The agreement also calls for returning transportation across the waterway to full capacity within 30 days.
Analysts predict a gradual recovery in oil flows through the Strait of Hormuz, but industry experts warn that prices may not fall considerably as global demand remains strong and reserves need to be replenished.
Goldman Sachs expects Gulf oil exports to return to pre-conflict levels by the end of July, with crude production fully recovered by October.
According to the investment bank, normalization may increase Hormuz flows by nearly 13 million barrels per day, bringing volumes back to roughly 70% of pre-war levels.
Despite the current fall, BNP Paribas believes oil prices will not return to pre-conflict levels. The bank sees $75 a barrel as a “durable floor for the foreseeable future,” noting ongoing supply bottlenecks and strong demand.
