An Iranian security guard monitors an area of phase 19 of the South Pars gas field in Assalooyeh on Iran’s Persian Gulf coast August 23, 2016.
Morteza Nikoubazl | Nuphoto | Getty Images
Oil prices fell on Wednesday after US President Donald Trump said Washington and Tehran were “in negotiations right now” and indicated that Iran wants to reach a peace agreementalthough the Islamic Republic has denied any direct negotiations with the United States
International reference Brent crude futures fell 4.52% to $98.71 a barrel, while U.S. futures West Texas Intermediate Futures were also down 3.72% at $88.89 per barrel.
Speaking from the Oval Office, Trump said he had backed away from his earlier threat to launch strikes on Iran’s energy infrastructure “based on the fact that we are negotiating.”
“They’re talking to us, and they’re talking common sense,” Trump said when asked to detail the change.
Later 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.
According to the report, it remains unclear to what extent the proposal, transmitted via Pakistan, was disseminated among Iranian officials. It is also unclear whether Israel, which is carrying out attacks against Iran alongside the United States, will support the plan.
The spokesperson for Iran’s Joint Military Command signaled that oil markets would remain volatile, warning that prices would not normalize until regional stability was ensured under its military control, Reuters reported.
Stock chart iconStock chart icon
The current oil supply disruption constitutes the most significant shock in decades, when measured by global supply share, Daan Struyven, co-head of global commodities research at Goldman Sachs, said on a call with media, highlighting the unusually high uncertainty facing markets.
The bank noted that near-term price movements are driven less by changes in the base-case outlook than by changes in the perceived probability of worst-case scenarios. Crude is effectively trading at a geopolitical risk premium as investors hedge against prolonged disruptions and extremely low inventories, Goldman said.
The bank’s base case scenario assumes that flows through the Strait of Hormuz will normalize in April over a four-week period.
