US benchmark WTI crude futures fell below $75/bl today as negotiations between the US and Iran continue in an effort to fully open the strait of Hormuz to tanker traffic.
July Nymex WTI settled at $74.82/bl on Monday, lower by $1.78/bl from its settlement 18 June. There was no Nymex settlement on 19 June because of a federal holiday in the US.
August Ice Brent settled at $77.90/bl for a drop of $2.67/bl from the 19 June session and lower by $1.95/bl from 18 June.
The August Brent-August WTI spread came in at $4.04/bl, wider by 4¢/bl compared with 18 June.
WTI at the Magellan East Houston terminal was discussed at a prompt 5-15¢/bl premium bid-ask spread to the Cushing benchmark at 3pm ET, down from last session's 38¢/bl premium volume-weighted average.
The US and Iran will establish a committee that will oversee negotiations on nuclear capabilities, sanctions and a monitoring and dispute resolution group, mediating parties Qatar and Pakistan said in a joint statement on Sunday.
The agreement follows a meeting between US and Iranian officials in Switzerland the same day, which took place after a memorandum of understanding was signed by the two countries on 18 June to end the conflict.
The committee has also agreed on a roadmap towards reaching a final deal within 60 days. It will also set up a communication channel between the countries, aiming to "avoid incidents and miscommunication" to ensure commercial ships transit the strait of Hormuz safely.
Ships can now use the southern route around the Omani coast through the strait of Hormuz, the global maritime security partnership Joint Maritime Information Center (JMIC) has said.
Shipowners have been largely avoiding the southern route and instead preferring to use the two Iran-established shipping lanes to the north of the strait as the southern route is close to the mined area and still within view of Iran.
But now that the strait has been reopened as part of the US-Iran memorandum, ships "may transit the southern route day or night with their AIS on, radars radiating, running lights on, and normal use of VHF," JMIC said.
Three Iranian very large crude carriers (VLCCs) were the only crude tankers to cross the strait of Hormuz and exit the Mideast Gulf in the 24 hours to 11:00 BST on Monday with their AIS signals active. Non-Iranian tanker traffic has fallen as US-Iran tensions rose despite their preliminary framework deal to end the war.
The VLCCs Elva, Vigor and Virgo passed through the strait in a convoy and are now in the Gulf of Oman heading east, according to MarineTraffic and Kpler. The ships are carrying crude from Iran's Kharg Island and will likely head to east Asia, the typical destination for such cargoes.
It is unclear whether tensions over the weekend have led to tighter controls again, with US naval forces still operating in the region despite diplomatic efforts between Washington and Tehran.
The US will allow unlimited sales of Iranian crude, refined products and other petrochemical products until 21 August, in another concrete step toward implementing the US-Iran deal.
Nymex RBOB fell by 0.79¢/USG to $2.9870/USG while Nymex ultra-low sulphur diesel fell by 3.42¢/USG to $3.0931/USG.
By Brett Holmes
