Brent falls to lowest since March on expected peace deal
Oil Prices Drop Amid Anticipated U.S.-Iran Peace Agreement
HOUSTON, June 12 (Reuters) - Brent crude prices fell to their lowest levels since early March as traders grew more confident about an imminent peace agreement between the U.S. and Iran.
Brent futures settled at $87.33 a barrel, down $3.05, or 3.37%.
U.S. West Texas Intermediate (WTI) crude finished at $84.88, down $2.83, or 3.23%. That was WTI's lowest level since April 17.
Market Reactions and Analyst Insights
"What's got the market going down is the Iranians saying there is a memorandum of understanding (with the U.S.)," said John Kilduff, partner with Again Capital.
Details on the Potential Agreement
A memorandum between the U.S. and Iran to halt the war in the Gulf could be signed as soon as Sunday, a Western source told Reuters on Friday, with Geneva emerging as the likeliest venue.
Iranian Foreign Minister Abbas Araqchi said on Friday that a memorandum of understanding had not yet been signed and could still change.
Negotiation Points and Exclusions
U.S. President Donald Trump called off threatened air strikes against Iran on Thursday, while Iran's Mehr news agency reported that final negotiations on the memorandum would focus on nuclear and economic issues but would exclude discussions about Iran's missile programme.
Iran's IRNA news agency, meanwhile, said nuclear talks would take place within a 60-day period after a memorandum was signed.
Impact on Oil Markets and Supply Concerns
"Headlines are driving the market once again as confidence grows that an eventual deal will be struck and the Strait (of Hormuz) reopens," said Tamas Varga, an analyst at PVM Oil Associates.
One caveat, however, is that global and regional oil stocks are still low and could drift lower, even with a deal, as it would take time to ensure uninterrupted oil flows, he added.
Strait of Hormuz and Shipping Disruptions
On Thursday, Iran announced a complete closure of the strait, saying it would fire on any ship trying to pass through. Traffic through the strait, which normally carries a fifth of global oil and liquefied natural gas shipments, has been extremely limited as a result of the war.
The U.S. military, however, said on social media that commercial ships continued to transit the waterway.
Future Outlook and Market Projections
"We believe the market reaches an inflection point in late July if we do not see oil flows resuming before then," ING analysts said in a note. "This is when inventory levels and seasonally stronger demand push prices significantly higher towards $120-130 per barrel."
Again Capital's Kilduff said an agreement couldn't come at a better time.
"This really can't go on much longer before there are shortages," he said.
Forecasts from Major Institutions
Goldman Sachs lowered its 2027 average Brent forecast to $80 a barrel on higher supply and lower demand, but expects prices to exceed the 2025 average on stockpiling of OECD commercial oil stocks and a security premium for disruptions.
The Organization of the Petroleum Exporting Countries on Thursday lowered its forecast for 2026 world oil demand growth to 970,000 barrels per day from a previous 1.17 million bpd, its second straight downward revision.
The producer group also said consumption would eventually rebound. It expects oil demand in 2027 to rise by 1.73 million bpd, up 190,000 bpd from its previous forecast.
Reporting Credits
(Reporting by Erwin Seba in Houston, Sudarshan Varadhan and Emily Chow in Singapore, and Ahmad Ghaddar in London; Editing by Louise Heavens, Kevin Liffey, Paul Simao and Edmund Klamann)
