(RTTNews) – Extending the losses from yesterday’s session, crude oil prices have tumbled on Thursday as expectations for a diplomatic approach to resolve the U.S.-Iran crisis strengthens even as the recent flare-up in the conflict persists without a let-down.
WTI Crude Oil for August month delivery was last seen trading down by $0.90 (or 1.13%) at $78.70 per barrel.
The escalation of tension between the U.S. and Iran following an Iranian strike on a Cyprus-flagged vessel recently increased concerns of a widespread war in the Middle East.
After the U.S. and Iran signed a Memorandum of Understanding on June 17 to stop the war, which commenced on February 28, Iran reopened the Strait of Hormuz. Momentum in oil and energy trade gathered pace after the ships stranded near the region since the war began started heading towards their respective destinations.
However, Iran recently conducted a strike on a Cyprus-flagged vessel that did not coordinate with Iranian authorities.
In response, U.S. forces launched a barrage of attacks on Iran, targeting their military installations, with an aim to destabilize Iran’s capability to hit vessels transiting through the strait.
In retaliation, Iran attacked several U.S. bases in neighboring Arab nations.
U.S. Central Command announced that U.S. forces are fully prepared to escort vessels safely in and out of the seaway while Iran repeatedly asserted that the passage is under its control.
The uncertainty over the strait’s management and the risk of being attacked prevented seafarers from navigating through the region. With supply disruptions resurfacing, oil prices moved higher.
Leaders from both nations engaged in fiery exchange of verbal rhetoric.
U.S. President Donald Trump warned Iran to secure a deal with the U.S. quickly failing which it will undergo heavy destruction.
Iran’s Parliamentary Speaker Mohammad Bagher Ghalibaf stated that Iran would not remain committed to the MoU if it does not benefit Iran.
However, Trump later stated in an interview with Fox Business that Iran was seeking to have a deal with the U.S. and approached the U.S. for a meeting and stated that he preferred to wait and watch the developments.
Ghalibaf also stated that tools of diplomacy and negotiations must be used to achieve Iran’s national interests. He observed that negotiations do not mean capitulation.
Ghalibaf acknowledged facing criticism within Iran from hardliners but still defended diplomacy.
Of significant note, in the elections for the Iranian parliament’s National Security and Foreign Policy Committee, Ghalibaf secured a seventh consecutive term as speaker. Hardliners lost key posts, suffering a severe setback.
According to the data from maritime intelligence agency Kpler, only seven vessels transited the strait on Wednesday, down from 13 on Tuesday. Of note, there were no Very Large Crude Carriers or Liquefied Natural Gas tankers among them.
After the recent exchange of attacks between the U.S. and Iran, crude oil prices have surged by nearly 12.00%.
The recent decision by the Organization of Petroleum Exporting Countries to boost crude output by 188,000 barrels per day in August is bearish for crude oil prices.
Yesterday, the U.S. Energy Information Administration reported that U.S. crude oil inventories fell by 1,693,000 barrels
Energy experts are focused on how the Middle East crisis develops over the coming days.
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