Oil falls for third day, market assesses progress in talks with Iran
World oil prices fell for the third consecutive trading session on Wednesday, August 5. The market hopes that the US and Iran will agree on the resumption of navigation through the Strait of Hormuz, which will allow increased energy supplies from the Persian Gulf.
Brent crude futures dropped below $79 a barrel, while US West Texas Intermediate traded near $75. Over the two previous sessions, the benchmark varieties lost more than 10%.
At the close on Tuesday, October Brent contracts lost 5.3% and ended at $79.36 per barrel. September WTI futures fell 5.7% to $75.77. Both grades reached their lowest levels in about four weeks.
Pressure on prices intensified after Qatar's statement on preparing an interim proposal for the Strait of Hormuz. Representatives of Washington and Tehran also reported progress in negotiations.
US President Donald Trump told journalists in Los Angeles that the talks went well and are moving in a positive direction. According to him, more information about a possible agreement could emerge within 48 hours.
According to Axios, as cited by Bloomberg, the US, Iran and Oman have come close to concluding a 60-day interim agreement. Washington expects to announce it as early as Wednesday.
The draft envisages the resumption of ship movement without payment of duties or other fees. Vessels bound for the Persian Gulf must use the northern corridor, and those departing it — the southern one.
The potential opening of the strait reduces fears of an oil shortage in the global market. The Hormuz route is critical for the export of raw materials from Saudi Arabia, Iraq, Kuwait, Qatar and the United Arab Emirates.
At the same time, a final agreement has not yet been reached, so the market remains sensitive to the statements of the parties and the situation with maritime safety. On the eve, analysts warned that prices could have factored in a diplomatic breakthrough too quickly, while differences between the US and Iran persist.
Sources: Bloomberg, MarketWatch
