Global oil prices hit a two-month low on June 16, with Brent crude briefly dropping below $80 a barrel and WTI crude falling 4% to $77.43, driven by enthusiasm over a U.S.-Iran memorandum of understanding (MoU) to reopen the Strait of Hormuz.
Key Takeaways:
Brent fell below $80 on June 16 as the U.S.-Iran MoU lifted Hormuz reopening hopes.WTI dropped 4% to $77.43, but IEA damage data point to tight Gulf supply.Bull Theory sees a 30-day Hormuz restart, with inflation risk over 12 to 24 months.The U.S. benchmark, West Texas Intermediate (WTI) crude, fell 4% to $77.43 a barrel. WTI crude has plunged by nearly 20% since the beginning of June, underlining the Strait of Hormuz’s continued importance to the oil market.
While details of the MoU have not been formally released, widespread reports say the deal compels Iran to reopen the Strait of Hormuz. In exchange, the country will reportedly receive sanctions relief, billions of dollars in unfrozen assets and potentially billions of dollars in investment.
The Bull Theory analysis outlines the harsh realities the global energy industry must grapple with once the agreement takes effect.
“Equipment needs to be inspected and certified safe before restart,” Bull Theory explained. “Workers need to return to facilities that were recently under attack. Insurance markets do not immediately return to cover a region that was at war last week.”
Furthermore, while the MoU dictates that the Strait of Hormuz will reopen within 30 days, the physical supply slated to flow through it will likely take months or even years to return to full capacity.
