Brent Crude Oil Price Drop: The biggest news of this time is coming from the global energy market. Such a historic decline has been recorded in the prices of crude oil in the international market, which has destroyed the entire boom of the last several months in a moment. After a huge fall of about 5% in the previous session, Brent Crude closed around $83 per barrel, but by Tuesday afternoon it fell further by 1.7% to $81.4 per barrel. On the other hand, West Texas Intermediate (WTI) also fell to a very low level of $78. The gunpowder that had boiled over oil prices due to the months-long war in the Persian Gulf now seems to have calmed down completely.
The biggest reason behind this sudden fall in crude oil prices is the possible 'peace deal' between America and Iran. Global traders and big investors are currently eyeing the meeting between Washington and Tehran on Swiss soil, where an interim agreement is expected to be signed later this week. However, along with relief in the market, there is also a deep suspense. Traders are extremely cautious as neither US President Donald Trump nor the Iranian administration has yet made public the details of the main terms and conditions of the proposed Memorandum of Understanding (MoU).
Speaking from the stage of the ongoing G7 summit in France, US President Donald Trump has surprised everyone by making a big claim. Trump said the Strait of Hormuz would be "fully open and toll-free" by next Friday. Let us tell you that before this great crisis, about one fifth (20%) of the world's total oil supply passed through this very narrow waterway. Its closure in recent months had completely halted global shipments of crude, petroleum fuel and liquefied natural gas (LNG), forcing many countries including India to use their emergency strategic oil reserves.
Even though President Trump is all set to open this route on Friday, energy analysts have issued a big and scary warning. Experts say that even after the signing of the agreement, the flow of oil will not return to normal immediately. Data from shipping intelligence firm 'Kpler' has exposed this bitter truth. According to the report, approximately 300 heavy-duty cargo ships loaded with crude oil and gas are currently waiting to exit the Persian Gulf, while an equal number (300) of empty ships are queuing up at sea to enter the region and load cargo. This huge logistical backlog is a big challenge in itself.
There are many complex questions that are yet to be answered before this agreement can be implemented on the ground. The world's major shipping companies, commodity traders and energy buyers want more clarity on operational rules and tighter security measures before unloading their billion-dollar ships on this route. The biggest suspense is whether the marine insurance provided to ships in the war zone and its huge cost will be reduced? Additionally, how long will it take for the paperwork to remove international sanctions that hamper shipping activities? Until the curtain is raised on these diplomatic questions, this period of suspense and fluctuations will continue in the crude oil market.
