Oil Prices Fall Amid US-Iran Ceasefire Proposal

Illustration of refueling. World oil prices fell amid a proposed ceasefire between the United States and Iran. Photo: Pexels.

JAKARTA - Oil prices fell on Tuesday after a 10-day ceasefire proposal between the United States and Iran emerged. However, the new attacks by both parties, the tanker incident in the Strait of Hormuz, and the threat of a naval blockade against Saudi Arabia still overshadow the market.

Arab News, quoted Tuesday, July 21, said that Brent crude futures fell 96 cents, or 1.1 percent, to $88.26 a barrel at 0930 Saudi time.

West Texas Intermediate or WTI crude fell 73 cents, or 0.9 percent, to $82.50 a barrel. The more active September futures also weakened 57 cents, or 0.7 percent, to $81.91 a barrel.

ING analysts said the mediator proposed a 10-day ceasefire. The move is expected to revive a temporary agreement signed on June 17.

"There is a slight hope of a reduction in tensions between the US and Iran. Reports say the mediator proposed a 10-day ceasefire," ING analysts said.

However, ING believes the path to an agreement is not easy. Major differences still separate Washington and Tehran. US President Donald Trump has also threatened to retaliate after a number of US soldiers were killed.

A senior Iranian official told Reuters that Tehran had accepted the proposal. The ceasefire was offered to save the June 17 deal, which was prepared as a path to a permanent agreement.

The agreement is expected to end the war that broke out on February 28 after a US and Israeli attack on Iran.

Diplomatic efforts are underway when the attacks have not stopped. The US has again attacked a number of cities in Iran, while the Iranian Revolutionary Guard has attacked US military assets in a number of areas.

The US Central Command on Monday also announced the start of a new wave of attacks against Iran.

Energy supply risks increased after a tanker in the Strait of Hormuz was reportedly hit by a projectile of unknown origin. The crew was forced to abandon the ship and move to a lifeboat.

The UK Maritime Trade Operations Agency said ship traffic through the strait had again declined due to increased caution after the new US and Iranian attacks.

The pressure increased after the Houthi group in Yemen allied with Iran threatened to impose a naval blockade on Saudi Arabia.

Head of Market Analyst KCM Trade Tim Waterer assessed that the threat increased the risk of disruption to one of the world's major oil exporters.

"The threat of a naval blockade of Saudi Arabia by the Houthis increases the risk of disruption to other major oil-exporting countries," Waterer said.

In the United States, crude and gasoline inventories are expected to have fallen last week. By contrast, distillate fuel stocks are expected to have risen, according to a Reuters survey.