(RTTNews) – Partially reversing three sessions of gains, crude oil prices have plunged on Wednesday as expectations of de-escalation in the Middle East rise following an Israel-Lebanon ceasefire announcement along with rising optimism on a U.S.-Iran deal over the weekend.
WTI Crude Oil for July month delivery was last seen trading down by $3.00 (or 3.12%) at $93.02 per barrel.
In a crucial development yesterday, after the fourth round of negotiations between Israel and Lebanon (mediated by the U.S.) in Washington, the three nations issued a joint statement according to which Israel and Lebanon have agreed to implement a ceasefire.
The two countries consented that the future of their relationship will be decided only by the two sovereign governments.
The ceasefire is contingent on a complete cessation of the Hezbollah militant group’s firings as well as the evacuation of all Hezbollah operatives from the South Litani Sector.
Further, Lebanon should create pilot security zones wherefrom the Iran-backed Hezbollah would be banned.
Market participants received the news with enthusiasm, expecting a quicker de-escalation in West Asia.
Since the gulf war began on February 28, the Strait of Hormuz remains effectively shut.
In the U.S., gas prices are averaging at $5 per gallon with inflationary concerns rising everyday.
Yesterday, during testimony to the U.S. Congress, U.S. Secretary of State Marco Rubio affirmed that Iran had agreed for discussions on its nuclear program. However, Rubio ruled out any sanctions relief to Iran in exchange for reopening the Strait of Hormuz alone.
Rubio asserted that discussions on unfreezing of Iranian assets in foreign nations would begin only when Iran discusses its nuclear programs.
As the conflict drags into the fourth month, yesterday in the U.S. Congress, the House of Representatives voted 215-208 to direct U.S. President Donald Trump to withdraw U.S. forces stationed near Iran. While Trump called this move unpatriotic, legal experts view this as largely symbolic.
The resolution now heads to the Republican-controlled Senate, and even if both chambers pass the legislation, Trump would veto it or contest its constitutionality.
Meanwhile, speaking at the White House, Trump stated that talks with Iran are progressing well. Trump speculated that a potential agreement could be arrived in a couple of days. Trump also assured that the Strait of Hormuz would reopen as soon as a deal is signed.
While Iran has been insisting that regional issues involving Israel and Lebanon are interconnected with the U.S.-Iran talks, Trump emphasized that U.S.-Iran negotiations should be separate from Israel-Lebanon issues.
Trump downplayed the recent exchange of attacks in the gulf between U.S. forces and Iranian military which raised threats of the current ceasefire collapsing.
Iran’s Foreign Minister Abbas Araghchi stated that lines of communication with the U.S. were still open and both the nations are studying the texts.
Sounding contrary to Trump, Araghchi stated that no tangible progress has been made in the talks. Araghchi also warned that any attack on Lebanon by Israel could trigger a full-scale resumption of the U.S.-Iran war.
Due to months of supply disruption, the focus of experts is now shifting from when the crucial waterway will reopen to how quickly oil producers can restore the output to normal levels.
Kuwait Petroleum Company stated that it would need a minimum six to eight weeks to get back to even 70% of normal production levels as soon as Hormuz strait reopens though refinery operations could recover within two to three weeks.
The U.S. Dollar Index was last seen trading at 99.30, down by 0.14 points (or 0.14%).
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