Oil prices tumble amid hopes strait of Hormuz will soon reopen

Global oil prices have tumbled amid fresh hopes that a US-Iran peace deal may end the greatest energy supply crisis in the history of the market.

The price of Brent crude dropped below $84 a barrel as the new trading week began in financial centres across Asia-Pacific, amid optimism that the strait of Hormuz could reopen shortly and bring a return of Gulf oil exports to the market.

Trump said on Sunday that a deal was “now complete”, despite recent Israeli airstrikes on Beirut that had threatened to undermine the sensitive talks.

Many of the details of the agreement are unclear, notably around the timing of the reopening of the maritime route, who will oversee safe passage and whether any conditions will be applied. Iranian authorities have said there would be a 60-day negotiating period for a final deal tackling wider issues such as Tehran’s nuclear program and sanctions relief.

The benchmark international oil price traded 4% lower in early trade on Monday, extending the falls recorded on Friday. Oil prices are now at their lowest levels since early March, days after the Iran war began.

The oil price began tumbling late last week from $93 a barrel on Thursday to close at $87.50 on Friday after Trump said he was close to reaching a peace deal with Tehran which would end the regime’s effective chokehold on the oil trade route.

The US president also claimed that the US military had been secretly helping to move millions of barrels of oil a day through the strait in recent weeks to help ease the pressure in the global market.

Oil prices have remained lower than expected throughout the Iran war which brought Gulf oil exports through the strait to a halt in early March, effectively erasing 20m barrels of oil a day from the market – or a fifth of the market’s supplies.

Gulf producers have managed to reroute around 5m barrels of oil a day to the market via pipelines to alternative regional export hubs, while in recent weeks a further 2m barrels a day may have found their way to the market with the help of the US military via so-called “dark tankers” which shuttle cargoes undetected to vessels waiting in the Gulf of Oman before returning to reload.

Elsewhere, a record level of emergency crude and fuels has been released into the market by members of the International Energy Agency at a rate of about 2.5m barrels a day.

The world’s oil supply shortfall has also been narrowed by cuts to demand: China is estimated to have cut its imports by around 4m barrels a day to reach lows not seen in a decade, potentially by drawing on its record high inventories to meet demand and halting its aggressive stockpiling of recent years. Globally, demand may have fallen by between 3m and 4m barrels of oil a day as petrochemical refineries across Asia have cut back their activity to weather the crisis.