Oil prices crash 5% on US-Iran peace deal
What's the story
Oil prices witnessed a sharp decline on Monday, following President Donald Trump's announcement of a US-Iran agreement to end the naval blockade in West Asia. Brent crude fell by 3.9% to around $84 per barrel, while US crude dropped by 4.8% to about $81 per barrel. If these levels hold, it would be the lowest crude price since early March this year.
Market outlook
Experts warn of long road to normalization
Despite the market's optimism over the deal, experts warn that there is still a long way to go for crude flow normalization. Restoring global energy stability requires a coordinated effort: de-mining the Strait of Hormuz to ensure the free flow of maritime commerce, bringing West Asia oil production back online, refilling emergency petroleum reserves, and repairing damaged energy infrastructure. Oil analysts expect prices to remain high for some time due to potential demand surges and stockpile refills.
Agreement specifics
Deal with Iran confirmed by both sides
Trump announced on social media that a deal with Iran "is now complete," which Iran confirmed later. Both sides have agreed to lift the US blockade of Iranian ports and remove mines from the Strait of Hormuz. The peace deal will be sign on June 19 in Geneva. However, experts warn that it could take weeks for West Asian oil wells to resume production after being largely shut off during the war.
Price projections
Prices could skyrocket later this summer, warns expert
Bob McNally, president of Rapidan Energy, warned that if disruptions continue and shock absorbers like the US Strategic Petroleum Reserve are depleted, prices could skyrocket. "I'm very concerned we could see oil prices skyrocket later this summer with crude oil prices heading well into the mid- to high-$100 range and gasoline pump prices heading back to all-time highs around $5 a gallon," he said.