Oil prices rose near three-month lows on Wednesday June 17 as investors weighed the potential consequences of a peace deal between the US and Iran.
As of 08:18 GMT, Brent crude futures were up $0.02 at $78.98 per barrel (bbl), reports Reuters.
Meanwhile, US West Texas Intermediate (WTI) is estimated to be $0.03 higher at $76.08/bbl.
Both benchmarks have fallen about 5% in the past, adding to the decline caused by hopes that a deal between the US and Iran could allow more oil to be shipped through the Strait of Hormuz.
The first details of the peace deal emerged on Tuesday, when a US official said Washington would allow Iran to sell oil once the deal is signed.
The memorandum of understanding, which is not yet public, reportedly extends the April moratorium by another 60 days to facilitate negotiations for a permanent deal.
Israel did not join the April ceasefire agreement or the recent US-Iran deal, adding to doubts about the deal’s durability.
Industry observers warn that returning to pre-war production and refining levels in Iran may remain a long process.
In addition, new projections from the International Energy Agency (IEA) also showed a large supply surplus in 2027.
The IEA’s latest outlook suggests that by 2027, global oil supply could increase by eight million barrels per day (mbbl/d), while demand is forecast to increase by only 2mbbl/d.
In the short term, the IEA said that an interim agreement between Iran and the US could create conditions for the recovery of depleted inventories or the creation of new strategic reserves.
Meanwhile, China’s crude oil production fell 9.1% year-on-year in May to the lowest level since 2020, reflecting reliance on existing stocks amid ongoing tensions.
TS Lombard’s Rory Green report said China’s oil and gas capabilities have been bolstered by resource mobilization strategies and a shift to non-fossil energy, reducing exposure to global supply shocks. It also said that China is well-positioned to benefit from higher oil prices, but that the closure of the Strait of Hormuz remains a major risk to growth.
Meanwhile, data from the American Petroleum Institute showed a drop of 8.3 million barrels (mbbl) in US crude stockpiles in the week ending June 12, exceeding expectations for a 4.6mbbl drop.
Shore Capital analyst James Hosie said: “The Brent spot price has returned to its lowest level since early March at around $83/bbl as markets digest the growing tone that the US and Iran will sign a framework agreement to end the ongoing conflict.
