Oil price hits lowest since early March despite doubts over how quickly strait of Hormuz will reopen – business live

The oil price has dropped to its lowest level in almost 15 weeks, despite uncertainty over how quickly the strait of Hormuz will reopen.

Brent crude has fallen by almost 2.5% today to just over $81 a barrel, adding to Monday’s 4.75% drop. That’s its lowest level since 4 March, the first week of the Iran war.

However, it’s still some way above Brent’s pre-war level of $72.48 a barrel.

Oil traders are calculating that the reopening of the strait of Hormuz will lead to a rise in oil supplies from the Middle East, after Donald Trump said the vital waterway will reopen once the US and Iran have signed an initial memorandum of understanding.

Economists are warning, though, that it will take time for traffic through the strait to return to normal, as some production facilities need to be reopened, or repaired, and some oil and gas tankers are in the wrong places.

The head of the world’s biggest tanker operator, Mitsui OSK Lines , has told the Financial Times that ahipowners will not resume transit through the Strait of Hormuz for weeks until they are confident that the US-Iran deal is “material”.

double quotation mark Bosses of the world’s biggest shipping companies want to see more than just an agreement in place, mines need to be swept, and all hostilities must end, before tankers with hundreds of millions of dollars’ worth of cargo will be able to traverse the Strait without fear of a flare up in tensions that could close the Strait mid-voyage.

Thus, even if a deal is signed to end the US/Iran war, the situation is not without its challenges. Brent crude remains above $80 per barrel, and it is unlikely to fall below this level until we start to see cargo ships successfully get through the Strait.