Oil slips after US-Iran conclude talks in Switzerland

[SINGAPORE] Oil prices slid on Monday (Jun 22) after US-Iran talks concluded in Switzerland with Teheran saying it had secured waivers for oil and petrochemical exports, easing worries about a supply shortage in global markets.

Brent crude fell US$1.53, or 1.90 per cent, to US$79.04 a barrel by 0656 GMT. Prices had earlier climbed to US$82.30 at the start of trading, fuelled by a bumpy start to the talks with threats from US President Donald Trump to restart the war on Iran and Teheran’s announcement it had again closed the Strait of Hormuz.

US West Texas Intermediate crude futures were at US$76.53 a barrel, down 7 US cents, ahead of the contract’s expiry later on Monday. The more active August contract fell 55 US cents to US$75.30 a barrel. There was no settlement in the US market on Friday due to a holiday.

High-ranking US and Iranian officials wrapped up their first round of talks in Switzerland on Monday, mediators said. The talks began on Sunday under the terms of a memorandum of understanding reached last week to extend a tenuous ceasefire from April for at least another 60 days.

Iranian Foreign Minister Abbas Araqchi said that his country had secured waivers for oil and petrochemical exports, the release of some frozen assets and the launch of a reconstruction and development plan for Iran.

“High-level talks between the US and Iran in Switzerland over the weekend appear to have produced some progress, with both sides agreeing to establish a high-level committee,” IG market analyst Tony Sycamore said.

“However, whether these steps will deliver meaningful results on the ground remains to be seen, particularly in Southern Lebanon where both Israel and Hizbollah are seemingly intent on continuing their struggle.”

‘Very real risks’

Before the talks, the number of ships that passed the Strait of Hormuz fell sharply on Sunday, shipping data showed, after Iran announced it had again closed the waterway, citing Israeli and US violations of the interim peace deal.

Israeli strikes in Lebanon killed at least 20 people on Saturday, Lebanon’s state news agency NNA said, one day after a ceasefire with Hizbollah took effect, aimed at halting months of escalating violence.

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“Recent developments show that moving towards a more permanent deal will be challenging, with very real risks of a flare-up in hostilities during the 60-day ceasefire,” ING analysts said in a note.

Still, oil prices fell more than 8 per cent last week on hopes of more supply from the release of cargoes stranded inside the Gulf and the potential lifting of US sanctions on Iranian oil as part of the US-Iran deal.

Over 25 million barrels of Iranian oil have passed through the virtual blockade line since Monday, the head of the National Iranian Oil Company, Hamid Bovard, told state TV on Sunday.

The United Arab Emirates, Kuwait and Iraq have offered more oil to customers in the past week.

Iraq plans to restore crude production gradually to between 4.2 million and 4.3 million barrels per day, Iraq’s deputy oil minister for upstream affairs said on Sunday. REUTERS