Oil prices fall after report of breakthrough between US and Iran

Oil prices are falling today after reports that the presidents of the United States and Iran electronically signed a memorandum of understanding, paving the way for a peace agreement. North Sea Brent crude was down 2,4 percent shortly before 9:00 CEST, falling below 78 dollars a barrel. US West Texas Intermediate (WTI) crude was down 2,6 percent, trading below 75 dollars a barrel.

Brent crude is now trading at its lowest level since March 2. That was the first trading day after US-Israeli attacks on Iran began.

The memorandum, signed on Wednesday by US President Donald Trump and his Iranian counterpart Masoud Pezeshkian, is expected to pave the way for the reopening of the Strait of Hormuz. Under normal circumstances, about a fifth of global oil supplies pass through the strait.

Analysts warn that it will take some time for oil supplies through the Strait of Hormuz to return. "Shipowners may be reluctant to send tankers back to the region amid concerns that the agreement could still fall through," consultancy XAnalysts said, according to Reuters.

The International Energy Agency (IEA) forecast on Wednesday that a gradual reopening of the Strait of Hormuz next year would result in a significant surplus of oil on the global market. "If the agreement holds, exports and production from the Persian Gulf should gradually recover—not least because Iranian exports could fully resume once the US blockade is lifted," it said.

Oil prices in dollars per barrel (about 159 litres)