BEIJING, June 18 — Oil prices fell in early trading on Thursday after the United States (US) and Iran signed an interim agreement that would end the Iran war, reopen the Strait of Hormuz and waive US sanctions on Tehran's oil, resolving the largest energy supply disruption in history.
Brent crude futures were down ¢89, or 1.12 per cent, at US$78.66 a barrel as of 0005 GMT, and U.S. West Texas Intermediate fell ¢98, or 1.28 per cent, to US$75.81 a barrel.
The benchmarks resumed their decline, reversing gains made on Wednesday after US President Donald Trump said he could resume his bombing campaign if Iran's leaders "do not behave".
"The sell-off extended as energy markets continued to aggressively price in a faster-than-expected return of Iranian barrels following the recent US-Iran memorandum of understanding," IG market analyst Tony Sycamore said in a note.
The 14-point memorandum begins a 60-day negotiation period during which Iran will allow toll-free passage through the Strait of Hormuz, a key oil and gas shipping lane. The deal calls for traffic through the strait to be restored to its full capacity within 30 days.
The preliminary accord defers many of the more difficult issues, such as Iran's nuclear programme, and also requires the US and its partners to develop a US$300 billion (RM1.22 trillion) plan to finance Iran's recovery.
On Wednesday, the International Energy Agency cautioned that if the agreement is successfully implemented and the Strait reopened, this year's supply crisis could turn into a significant supply glut in 2027, forecasting in its monthly market report that supply will outstrip demand by 5.05 million barrels per day next year as Middle East oil returns to the market.
The US Federal Reserve (US Fed) is also increasingly weighing whether it will need to raise interest rates later this year to rein in inflation, a move that could slow economic growth and suppress oil demand.
Nine of 19 US Fed policymakers now think a rate hike will be needed, projections released Wednesday showed, a departure from three months ago, when none of them held that view.
