Iranian security personnel monitor the area of Phase 19 of the South Pars gas field in Assaroe on Iran’s Persian Gulf coast, August 23, 2016.
Morteza Nicobazul | Nur Photo | Getty Images
Oil prices fell on Wednesday after US President Donald Trump said the US and Tehran were “currently negotiating” and suggested Iran was keen to reach a peace deal, despite the Islamic Republic denying direct talks with the US.
International benchmark Brent crude oil futures fell 2.2% to $102.22 per barrel, while US West Texas Intermediate futures fell 2.2% to $90.32 per barrel.
President Trump said in the Oval Office that he was rescinding his earlier threat to launch attacks on Iran’s energy infrastructure “based on the fact that we are negotiating.”
Asked to elaborate on the shift, President Trump said, “They’re talking to us, and they’re talking sense.”
Late Tuesday, the New York Times reported, citing two unnamed officials, that the United States had sent Iran a 15-point proposal aimed at ending the war.
It remains unclear how widely the offer, which was delivered through Pakistan, was disseminated among Iranian officials, according to the report. It is also unclear whether Israel, which along with the United States is attacking Iran, will support this plan.
According to Reuters, Iran’s top spokesman for the Joint Forces suggested that the oil market remains volatile and warned that prices will not normalize until regional stability is ensured under military control.
Separately, Iran’s mission to the United Nations said on Tuesday that “non-hostile vessels” could transit through the strategically important Strait of Hormuz with coordination “with competent Iranian authorities.”
The social media post appears to establish an agreement revealed in recent days to allow some ships from China, India and Pakistan to pass through the waterway as Iran changes control of the waterway.
Iranian state media said the country would not accept U.S. ceasefire efforts.
The Middle East crisis has significantly disrupted oil exports through the Strait of Hormuz since the United States and Israel launched attacks against Iran on February 28. The maritime corridor typically transports about a fifth of the world’s oil and liquefied natural gas (LNG) and is a key choke point for the fertilizer trade.
Daan Struiben, co-head of global commodity research at Goldman Sachs, said in a media call that the current oil supply disruption is the biggest shock in decades when measured as a share of global supply, underscoring the unusually high uncertainty facing markets.
The bank noted that short-term price changes are due to changes in the perceived probability of the worst-case scenario, rather than changes in the outlook for the base-case scenario. Oil is effectively trading on a geopolitical risk premium as investors hedge against prolonged disruption and severe inventory shortages, according to Goldman.
The central bank’s base scenario assumes that flows through the Strait of Hormuz normalize for four weeks in April.
