Crude oil futures traded lower on Wednesday morning after US President Donald Trump said that ‘great progress’ has been made towards a ‘complete and final agreement’ with Iran.
At 9.21 am on Wednesday, July Brent oil futures were at $108.03, down by 1.67 per cent, and June crude oil futures on WTI (West Texas Intermediate) were at $100.43, down by 1.80 per cent. May crude oil futures were trading at ₹9546 on Multi Commodity Exchange (MCX) during the initial hour of trading on Wednesday against the previous close of ₹9698, down by 1.57 per cent, and June futures were trading at ₹9215 against the previous close of ₹9396, down by 1.93 per cent.
In a post on the social media platform Truth Social, Trump said: “Based on the request of Pakistan and other Countries, the tremendous Military Success that we have had during the Campaign against the Country of Iran and, additionally, the fact that Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran, we have mutually agreed that, while the Blockade will remain in full force and effect, Project Freedom (The Movement of Ships through the Strait of Hormuz) will be paused for a short period of time to see whether or not the Agreement can be finalized and signed.”
In their Commodities Feed for Wednesday, Warren Patterson, Head of Commodities Strategy of ING Think, and Ewa Manthey, Commodities Strategist, said oil prices are under renewed pressure as the ceasefire between the US and Iran appears to be holding despite recent escalation in the Persian Gulf. Meanwhile, the market sold off further in early morning trading on Wednesday after Trump paused ‘Project Freedom’ as the US seeks a deal to end the war with Iran. Trump said ‘great progress’ has been made towards a ‘complete and final agreement’. ‘Project Freedom’ is Trump’s plan to guide stranded commercial vessels in the Persian Gulf through the Strait of Hormuz. Its implementation led to a flare-up in tensions between the US and Iran. Looking ahead, developments in the Middle East will remain key to price direction.
They said that a deal that normalises oil flows through the Strait of Hormuz is crucial. Roughly 13 million barrels a day of disrupted supply is being largely offset by inventory, which is clearly declining rapidly. This leaves the market more vulnerable with each passing day. Tighter stocks will only leave the oil market trading in an ever more volatile manner.
Stating that Saudi Arabia cut its official selling price (OSP) for its flagship Arab Light to Asia for June, they said the OSP was cut from a record $19.50 a barrel premium over the benchmark in May to $15.50 a barrel. This is still the second-highest OSP on record. Crucially, this price assumes loadings from Ras Tanura, which sits in the Persian Gulf. This is clearly not happening. Instead, crude is being loaded at Yanbu on the Red Sea coast. As a result, final prices may be higher to reflect the logistical costs of shipping from the Red Sea, they added.