Oil prices sink on signs of U.S.-Iran deal

Global crude oil inventories are depleting at a record pace, worsening the energy crisis. Brent crude futures fell to about $98.76 per barrel, down 4.62% from Friday’s close. Even if an agreement opens the Strait, the process could take days and markets may remain disrupted for months. The conflict blocks roughly 14 million barrels of oil per day, according to the International Energy Agency. Saudi Arabia and the United Arab Emirates increased pipeline use to bypass the Strait, but added volumes do not offset normal traffic. The Strait carries about a fifth of global maritime oil and liquefied natural gas trade. Persian Gulf producers reduced output due to storage constraints, and restarting production takes time. Gasoline prices are likely to stay above $4 per gallon until ships transit the Strait at significant levels. Restoring transport confidence, de-mining, evacuating tankers, repairing facilities, and restocking inventories could take weeks to months and multiple quarters to years.

"Futures prices from the global benchmark Brent crude are back under $100 per barrel, trading around $98.76 Sunday evening, a 4.62% drop from Friday's close. Even if an agreement that opens the Strait is reached - a process that could take days - energy markets will remain disrupted for months."

"As of mid-May, the conflict was blocking the flow of around 14 million barrels of oil per day, according to the International Energy Agency. Saudi Arabia and the United Arab Emirates have increased the use of pipelines that bypass the Strait, but those added volumes don't come close to offsetting what normally travels through the narrow waterway."

"The waterway handles about a fifth of the global maritime oil and liquefied natural gas trade. Several Persian Gulf producers have dialed back production as storage space filled up, and that takes time to come back online. Gas prices are currently falling but until we see an agreement signed & a significant amount of ships transit through the Strait, the national average price of gasoline will likely remain well above $4/gal."

"Even if a deal emerges, it's not clear whether shippers will have confidence to quickly resume large-scale transport of crude oil and petroleum products. [D]e-mining the Strait, evacuating trapped tankers and restarting production could take weeks to months. [R]epairing damaged facilities, restoring pre-war output levels, and restocking depleted inventories could take multiple calendar quarters to years."

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