Oil prices slumped more than 10 per cent on Wednesday after reports that the US and Iran are nearing a deal to end the war that has strangled a fifth of global oil and gas supplies.
Brent, the benchmark for two thirds of the world's oil, plunged 10 per cent but recovered some lost ground to trade 8 per cent lower at 101.83 a barrel at 4.23pm UAE time. West Texas Intermediate, the gauge that tracks US crude, which slumped more than 12 per cent was trading 8.43 per cent lower at $93.65 a barrel.
For the week, both Brent and WTI have lost more than 11 per cent. Brent last settled below $100 mark on April 24, while WTI last closed below $90 on April 21.
“The twists and turns continue. The United States called off the safeguarding of trade through Hormuz again, keeping uncertainty high, and transits are down to a trickle for the time being,” said Norbert Rucker, head of economics and next-generation research at Julius Baer.
“Politics aside, the oil market has moved past the initial shock reaction and has settled in a regime of deficit absorption by inventory draws. There is breathing room to deal with the supply shock beyond summer.”
The US and Iran are closing in on a one-page agreement to end their war, a Pakistani source involved in the peace efforts told Reuters on Wednesday, confirming an earlier Axios report.
Washington expects Tehran's responses on a number of critical points within the next 48 hours, although nothing has been finalised.
A new round of talks between the two sides could take place either in Pakistan, which has been mediating during the ceasefire, or in Geneva.
This is the closest the US and Iran have been to a peace deal since the US and Israel started a bombing campaign on February 28, media reports cited source as saying.
“We will close this very soon. We are getting close,” one source told Axios.
While the warring parties negotiate, traffic through the Strait of Hormuz, through which about a fifth of the world's energy shipments transited before the war, remains at almost zero.
It briefly rose in late April, with crossings hitting 48 on April 27 and 41 on April 28, before falling back to between four and six daily crossings from April 29 to May 3, according to industry data.
The full reopening of the waterway is expected to ease the pressure on oil markets, though the industry and analysts have said that it would take a while before normal market activity is resumed.
