Oil Price Dips Below US$100 Per Barrel On Ceasefire Talks, Upside Risks Remain

By Siti Radziah Hamzah

KUALA LUMPUR, April 8 (Bernama) -- Oil prices fell below US$100 per barrel as the United States and Iran agreed to a two-week ceasefire in exchange for Tehran allowing safe passage through the Strait of Hormuz. 

At the time of writing, Brent crude fell 13.20 per cent to US$94.85 while West Texas Intermediate declined 14.58 per cent to US$96.48 per barrel.

SPI Asset Management managing partner Stephen Innes told Bernama: “What we are seeing right now is less a structural shift and more a mechanical unwinding of the geopolitical risk premium that had been priced in under a worst-case scenario.

“The move below $100 is largely positioning being stripped out, and in thin Asian trading conditions, that unwinding can easily overshoot.

“In the near term, oil can stay below US$100, but the floor is fragile. Without concrete de-escalation around the Strait of Hormuz, the risk of another spike remains very much alive,” he said.

Innes said the two-week ceasefire resets the clock. It provides markets with breathing room but does not resolve the core issue, as the absence of tangible progress on reopening the strait could see prices bid higher again.

He added that supply-side risks remain due to infrastructure damage that could take months to repair. Simultaneously, a clear signal that the strait remains open to traffic would go a long way in deflating prices further. In that scenario, a move back towards US$90 per barrel is plausible, if de-escalation gains traction.

The more optimistic outcome depends on sustained diplomatic alignment, although this remains uncertain. Meanwhile, markets are not fully pricing in expectations that the strait would remain open, he said.

Innes added that US midterm political considerations may limit a prolonged conflict, particularly given its position as the world’s largest oil producer.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid told Bernama a two-week truce would enable vessels to pass through the Strait of Hormuz, on which 20 per cent of global oil supplies rely.

A further de-escalation, if achievable, would pave the way for oil and gas facilities reconstruction. This would help reduce the supply bottleneck.

“Restoration would be gradual. What the market wants is certainty that the conflict will end and businesses can resume.

“Notwithstanding that, it is still early days. The prevailing condition is highly fluid. Hence, expect crude oil prices to remain volatile in the near term," he said.

-- BERNAMA