Oil falls as reports of 15-point proposal spurs ceasefire hopes

Oil prices sank about 5% on Wednesday after reports the United States had sent Iran a 15-point proposal ‌aimed at ending the war, prompting talk of progress toward a ceasefire and despite Israel and Iran exchanging airstrikes.

Brent crude futures was down $6.08, or 5.82%, to $98.41 a barrel by 1200 GMT, off a session low of $97.57. U.S. West Texas Intermediate crude futures were down $5.09, or 5.51%, at $87.26, off a low of $86.72.

Both benchmarks rose nearly ​5% on Tuesday, before paring gains in volatile post-settlement trading.

“The latest 15-point plan proposed by the U.S. administration still has ​to be reviewed and responded to, but considering the disruption timeline, it appears a faster and smoother resolution ⁠is being explored,” said Rystad analyst Janiv Shah.

“The elevated state appears to be the new norm for the oil market considering where ​the supply and demand balances and loss in fundamentals lies, but the rhetoric is heavily geopolitically driven.”

Iran has denied that direct talks had ​taken place and an Iranian military spokesman said the United States is negotiating with itself, .

If Iran remains a threat to Hormuz the world could face years of $100-$150 per barrel oil, Larry Fink, head of Blackrock, the world’s largest asset manager, told the BBC.”We will have global recession,” Fink said, when asked ​if oil stays at $150.

OIL SHIPMENTS VIA HORMUZ LARGELY HALTED

Phillip Nova’s senior market analyst Priyanka Sachdeva said Middle East developments would remain the “dominant ​price driver” keeping oil prices moving in a wide range in the near term.

The war has all but halted shipments of oil and liquefied natural gas ‌through ⁠the Strait, which typically carries about one-fifth of the world’s gas and crude supply. The International Energy Agency has called it the biggest-ever oil supply disruption.

The result is a daily loss of around 20 million barrels crude, meaning after 25 days a loss of some 500 million barrels, or 5 full days, of global supply.

“The market outlook remains tight notwithstanding the prospects of a war off-ramp,” said Saul Kavonic, head of energy research at ​MST Marquee.

He said that even ​if flows through the strait resume, “it’s ⁠not clear all shut-in production will resume until there is more clarity on the durability of a ceasefire.”

Iran has told the United Nations Security Council and the International Maritime Organization that “non-hostile vessels” may transit the ​Strait of Hormuz if they coordinate with Iranian authorities, according to a note seen by Reuters ​on Tuesday.

To offset ⁠the Hormuz disruptions, oil exports from Saudi Arabia’s Red Sea Yanbu port rose to nearly 4 million barrels per day last week, a sharp increase from before the war broke out, shipping data showed.

Meanwhile, Russia’s Baltic ports of Primorsk and Ust-Luga, major export terminals, suspended crude oil and oil products loadings ⁠on Wednesday ​after Ukrainian drone attacks sparked a blaze which could be seen from Finland, ​two sources told Reuters.

It was one of the largest strikes against Russia’s oil export facilities in the four-year war and will add to the uncertainty on the global oil market.