Oil Falls After Signs of Progress in Washington-Tehran Talks

SadaNews - Oil decreased following indications of progress in peace talks between Washington and Tehran, which seemed to have begun on a shaky note after U.S. President Donald Trump issued a new threat against Iran.

Brent crude dropped to around $79 per barrel, relinquishing earlier gains of up to 2.2%, while West Texas Intermediate crude hovered near $77.

The parties agreed on a roadmap to reach a final agreement within 60 days, and technical discussions will continue for the remainder of the week, according to a statement issued by Qatar and Pakistan, which are mediating the discussions in Switzerland.

This high-level meeting follows a memorandum of understanding signed by both sides last week, which opened a 60-day window for talks, although the process is likely to be long and rocky. Despite Iran's claim that it had again closed the Strait of Hormuz after accusing Israel of violating a ceasefire in Lebanon, millions of barrels of oil continued to flow through the waterway over the weekend.

The negotiations experienced a shaky start when Iranian media reported that Tehran had suspended talks following Trump's threat, but informed sources said negotiations continued into the early hours of Monday in Switzerland. The talks addressed topics including mechanisms to ensure the Strait remains open and how to enforce a ceasefire between Israel and Hezbollah in southern Lebanon, according to a senior U.S. diplomat involved in the discussions.

Roadmap for an Agreement Within 60 Days

The war in the Middle East has strangled supplies in a region responsible for a third of the world's oil production. Futures contracts for crude have dropped in recent weeks, although prices remain higher than pre-war levels, as global refining companies found temporary solutions and with the prospect of an end to the conflict feeding optimism for a swift return to normalcy.

A peace agreement could theoretically unleash a significant flow of supplies at a time when demand is currently low, particularly amid declining purchases from China, the largest importer. As much as 80 million barrels of crude could flood the market suddenly if Hormuz is fully reopened, threatening to leave refineries overwhelmed with supplies.

Meanwhile, Gulf producers are preparing to increase output, as Kuwait has canceled previous notices regarding force majeure. Abu Dhabi National Oil Company (ADNOC) has informed customers of the resumption of supply loading from within the Gulf, while offering spot crude in a series of tenders.

More than 11,000 Brent contracts were traded across the price curve in the first 10 minutes of Monday's session, indicating a more active start than usual. The spread of the spot price for the global benchmark also widened slightly in Bakodriction, although it has narrowed significantly since early April.

In the latest trading, August Brent futures fell by 1.6% to $79.30 per barrel by 12:30 PM Singapore time, while August West Texas Intermediate contracts also decreased by 0.2% to $76.73 per barrel.