Brent oil prices slid to nearly $70 a barrel on Thursday for the first time since the days leading up to the start of the US-Iran war, as supply worries continue to ease and the market monitors the progress in peace talks.
The benchmark for two thirds of the world's oil was down 1.29 per cent to $70.65 a barrel at 7.26am UAE time. Its price returned to prewar levels on Friday.
West Texas Intermediate, the gauge that tracks US crude, was trading down 1.44 per cent to $67.59 per barrel.
Brent and WTI surged during the four-month conflict, soaring as high as 70 per cent, but those gains have since been erased after Washington and Tehran agreed to a 60-day ceasefire and work to negotiate a lasting peace deal.
The price of crude has been largely stable – and has been steadily going down – despite a flare-up last week between the two sides. Markets are also keeping an eye on inflation and the possibility of US Federal Reserve interest rate rises.
On Wednesday, indirect technical talks between the US and Iran began in Doha, with the release of frozen Iranian assets and the Strait of Hormuz among the central issues.
Traffic volume the strait – which, prewar, was the key chokepoint for about a fifth of the world's energy exports – continues to improve, further easing supply issues.
In addition, futures declined further after the US Department of Energy reported that crude inventories fell by about two million barrels, which was less than expected.
"Investors and central bankers remain highly sensitive to the fast-moving developments in the Middle East - and the consequences for oil prices, inflation and bonds," said Matthew Carter, a strategist at Swiss bank UBS.
"Markets and rate-setters will be hoping that if these [oil price] levels hold, the risk of both an immediate inflation shock and aggressive central bank rate hikes will wane."
The market is also anticipating Sunday's decision from Opec+. The oil-producing group is reportedly expected to raise output quotas by about 188,000 barrels per day in August, similar to its decision for July, Reuters reported, citing sources.
That would be a fifth consecutive month of production increases, as oil prices continue to decline and Opec+ works to balance the market.
Last month, the smaller Opec bloc lowered its demand outlook for this year for the second consecutive time, while remaining confident of a “resilient” global economy amid the disruption caused by the Iran war.
The oil group cut its demand view to 970,000 bpd, from a previous assessment of 1.17 million bpd, the Vienna-based Opec said in its monthly report for June.
