Crude oil prices continued to fall after markets increased expectations that Iranian oil could soon return to world markets as a result of a planned agreement between the United States and Iran to end the conflict, Reuters reported. This reduced inflationary pressures and caused a decline in government bond yields, as investors await the first meeting of the Federal Reserve Board under the leadership of new Chairman Kevin Warsh, BTA reported.
Brent crude oil futures fell by $ 0.46, or 0.65 percent, to $ 78.45 a barrel, reaching their lowest level since the beginning of the conflict between the United States and Iran in late February. US light crude futures were down 0.78 percent at $75.46 a barrel.
A senior US official said Washington was ready to lift sanctions on Iranian oil as part of a future peace deal that would allow millions of barrels a day of oil to return to the global market.
According to HSBC analyst Kim Fustier, markets are already pricing in a high probability of a gradual return to normal flows through the Strait of Hormuz, although the bank said this process would likely continue until the end of September.
Meanwhile, government bond yields fell. The yield on 10-year Japanese government bonds fell by 1.5 basis points to 2.63 percent, while that on 10-year Australian bonds fell by nearly 5 basis points to 4.787 percent.
Despite the optimism surrounding the agreement in preparation, a number of issues remain unclear. The blockade of the Strait of Hormuz, which lasted nearly three months, has significantly depleted global crude oil reserves. According to US authorities, US stocks have reached their lowest level since 1983.
Before the conflict began on February 28, Brent crude was trading at $72.48 per barrel, and US light crude oil - at $67.02. After the fighting began, prices rose sharply due to concerns about supplies through the Strait of Hormuz, which before the war carried about a fifth of the world's oil trade.
US President Donald Trump said the deal would rule out Iran developing nuclear weapons, and US officials said it would allow Tehran to immediately resume oil exports after signing. The document is expected to be signed on Friday.
The deal also provides for a 60-day extension of the ceasefire reached in April, as well as the full restoration of shipping through the Strait of Hormuz.
Some analysts, however, remain cautious. Experts warn that the restoration of maritime traffic and energy exports could take weeks. Further doubts have been raised by the position of the Iranian-backed group “Hezbollah“, which said that in its opinion Tehran will not sign a final nuclear agreement if Israel does not withdraw from Lebanon.
“So far, there is great confidence in the success of this plan, with limited attention paid to difficult issues such as financial compensation, sanctions and especially the final nuclear agreement, which was among the main causes of the conflict“, analysts from the consulting company “Ritterbusch and Associates“ said.
Following news of progress in the negotiations, several leading investment banks, including “Goldman Sachs“, “Morgan Stanley“ and “Citigroup“, have already lowered their forecasts for oil prices in the coming months.