(RTTNews) – Extending three consecutive sessions of losses, crude oil prices were in freefall on Tuesday with transit disruption concerns fading due to an imminent U.S.-Iran deal. In addition, reports hinting that U.S. has allowed Iran to sell its oil once the deal is signed brought in excess supply concerns, pushing oil prices further down.
WTI Crude Oil for July month delivery was last seen trading down by $4.90 (or 6.07%) at $75.85 per barrel.
Crude oil prices continued to moved lower after expansive war-threat concerns in the Middle East faded after the announcement of a preliminary deal between the U.S. and Iran.
On Sunday, U.S. President Donald Trump announced via Truth Social that a deal with Iran has been completed, which Iran’s Deputy Foreign Minister Kazem Gharibabadi confirmed separately.
The Strait of Hormuz had been shut by Iran since the war broke out. Later in April, the U.S. enforced a naval blockade on ships entering or exiting Iran’s ports.
The newly agreed framework allows a 60-day U.S.-Iran ceasefire and paves the way for the immediate reopening of the Strait of Hormuz which will allow the resumption of oil and energy transit.
To ensure the safety of the vessels, Iran-planted sea mines across the Strait of Hormuz will be first removed.
In addition, Trump also lifted the naval blockade on Iranian ports.
An official signing ceremony of the agreement is slated to be held likely at Burgenstock Resort in central Switzerland on Friday.
Decisions on crucial sticking points including relief for Iranian exports from sanctions imposed by the U.S. and the West, unfreezing of billions of dollars of Iranian assets in foreign nations, authority over the Strait of Hormuz, the Israel-Lebanon ceasefire, transfer of Iran’s weapons-grade uranium, etc. are unclear as of now.
Full text of the Memorandum of Understanding, when released on Friday, will shed more light on how both the nations have agreed on several points of disagreements.
Today, at the G7 summit in France, dismissing reports of Iran receiving nearly $300 billion as reconstruction fund, Trump told reporters that the U.S. is not investing any money in Iran.
Through Truth Social, Trump reaffirmed that Iran has agreed not to have a nuclear weapon.
Experts cautioned that energy markets will return back to pre-war levels only when normalcy returns in logistics, insurance, and regional stability.
With crude oil prices moving downwards for the past few days, inflationary pressure is easing, allowing central banks to revisit their earlier decisions on tightening monetary policy.
In related news, citing people familiar with the agreement, the Wall Street Journal reported that a provision in the deal allows Iran to sell its oil and fuel immediately after the signing.
Further, Iran is allowed to utilize banking, transportation, and insurance services to facilitate sales.
Traders are concerned about excess oil flowing into the market too quickly in the coming days.
Investors are currently focused on the ongoing two-day monetary policy meeting of the U.S. Federal Reserve. The new interest rates will be announced tomorrow by the U.S. Fed. Of note, this is the first meeting under the new Fed Chair Kevin Warsh.
The U.S. dollar index was last seen trading at 99.53, down by 0.12 points (or 0.12%) today.
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