Oil prices fell on Friday as prospects brightened for more supply after oil tankers began moving through the reopening Strait of Hormuz following a peace deal between the United States and Iran.
By 0328 GMT, Brent crude futures fell 43 cents, or 0.54%, to $79.42 a barrel and U.S. West Texas Intermediate crude slipped 17 cents, or 0.22%, to $76.43 a barrel, with the front-month July contract expiring on Monday.
The more actively traded August contract was down 30 cents at $75.55 a barrel.
On Thursday, both benchmarks touched their lowest since early March as several tankers, including three Saudi-flagged vessels carrying 6 million barrels of crude, sailed through the strait hours after the presidents of Iran and the United States signed an interim deal to end their war.
Analysts expect the deal to release more than 85 million barrels of oil stranded in the Middle East Gulf into global markets. The agreement also includes the lifting of U.S. sanctions on Iranian oil, which would further swell supply.
“Traders are still waiting for hard evidence that tanker traffic through the Strait of Hormuz is actually normalising before committing to the next leg lower,” said Tim Waterer, chief market analyst at KCM.
Roughly a fifth of the world’s oil and liquefied natural gas transited the strait prior to the war, and analysts have suggested trade could return to normal in coming months if the U.S.-Iran deal holds.
Middle East producers are also gearing up to resume exports.
Kuwait Petroleum Corp said on Thursday it had lifted with immediate effect all force majeure notices issued during the war.
Iraq’s oilfields are ready to resume production and output will gradually return to normal, restoring previous rates, Oil Minister Basim Mohammed said.
However, Israel has continued its war against Hezbollah in Lebanon, raising questions about whether the U.S.-Iran peace agreement will hold.
In another disquieting sign for markets, U.S. Vice President JD Vance pulled out of a planned trip to meet Iranian negotiators in Switzerland on Friday.
“This is not the geopolitical backdrop that would give the market any confidence in resuming Hormuz transit,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.
(Reporting by Mohi Narayan in New Delhi and Helen Clark in Perth; Editing by Sonali Paul and Clarence Fernandez)