Oil prices have declined following indications of progress in nuclear talks between the United States and Iran. These developments have reduced the risk premium factored into benchmark futures prices. West Texas Intermediate (WTI) crude oil fell, trading below $US63 a barrel. This drop occurred after Iranian Foreign Minister Abbas Araghchi announced a “general agreement” with the US regarding a potential nuclear deal. The deal could lead to the lifting of sanctions on Tehran and de-escalate the risk of conflict in the Middle East.
Brent crude also experienced a significant decrease, sliding 1.8 per cent to $US67.38 at 2.04pm in New York (6.04am AEDT). A successful resolution of the nuclear talks could lead to the sustained removal of a geopolitical risk premium. This premium has contributed to elevated oil prices since the beginning of the year, amidst increasing global oil supplies.
Earlier in the day, oil prices had briefly risen following Iran’s announcement of military drills that would temporarily close parts of the Strait of Hormuz. However, traders expressed doubt about the potential for any significant disruption to the waterway, which is crucial for the shipment of approximately one-fifth of the world’s oil supply. The United States has also deployed a second aircraft carrier to the region, adding another layer of complexity to the situation.
