WTI Oil tumbles as Strait of Hormuz deal optimism overrides US inventory drawdown
West Texas Intermediate (WTI) Oil declines to around $73.20 at the time of writing on Thursday, down 2.35% on the day, and hits its lowest level in more than three months as investors continue to price in the prospect of a lasting easing of tensions in the Middle East.
Selling pressure intensified after the United States (US) and Iran signed a peace agreement on Wednesday. According to details released by US officials, the deal includes guaranteed safe passage through the Strait of Hormuz, a key artery for global Oil transportation. In exchange, Washington would grant sanctions relief on Iranian Oil exports, release frozen funds and contribute to a reconstruction fund aimed at covering war-related damages.
The Swiss Ministry of Foreign Affairs also confirmed that talks between US and Iranian representatives will continue on Friday at the Bürgenstock resort to negotiate the implementation of the agreement. These developments reinforce expectations of a gradual normalization of energy flows in the region and help ease concerns about global Oil supply disruptions.
For now, these developments are overshadowing otherwise supportive signals from the US Oil market. On Wednesday, the Energy Information Administration (EIA) reported that commercial Crude inventories fell by 8.262M barrels in the week ending June 12, almost double the 4.6M draw expected by analysts.
The agency also noted that this marked the tenth consecutive weekly decline in inventories, leaving US Oil stockpiles at their lowest level in more than 40 years. Under normal circumstances, such a significant reduction in available supply would provide support to prices. However, optimism surrounding the Washington-Tehran agreement continues to dominate market sentiment and is largely offsetting concerns about a tightening physical market.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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