A MART脥NEZ, HOST:
The chief negotiator between the U.S. and Iran says there is a deal to end the war that will be signed on Friday. Details, though, aren't public. President Trump says it will lead to the reopening of the Strait of Hormuz, and global oil markets responded with their version of a sigh of relief. Crude prices dropped to their lowest level since the beginning of the war. NPR's Camila Domonoske covers energy.
So what do we know about how this deal, once it's signed, will affect the flow of oil?
CAMILA DOMONOSKE, BYLINE: Yeah, A, there are still a lot of questions about the exact terms here. We haven't seen the actual text of an agreement yet. President Trump had initially posted online that he was authorizing the toll-free reopening of the Strait of Hormuz. That's the crucial waterway through which about a fifth of the world's oil and liquefied natural gas passed before this conflict. He later wrote that the strait would reopen after the deal is signed Friday to allow for the removal of mines. The timeline here is a bit murky. But oil markets responded very enthusiastically. Prices for a barrel of crude had been north of 100 bucks a barrel for most of this conflict. Those prices had already been dropping. They fell a lot on Thursday and Friday in anticipation of a deal like this. And when trading reopened after the weekend break on Sunday evening, they dropped even more. I'm looking now. The global benchmark for crude is right around $83 a barrel.
MART脥NEZ: Is that where it - what it was before the conflict began?
DOMONOSKE: No, no, prices had been down in the 60s. So we're still quite a bit higher than pre-war, and those prices are not likely to come all the way down, at least right away. I spoke with Kevin Book with ClearView Energy Partners, and he says you have to remember that there were important facilities, including oil production fields and refineries and ports, that were shut down or damaged in this conflict. That's going to take time to get those back up and running. Meanwhile, global stockpiles of crude oil were tapped into to compensate for the missing crude during the supply shock. Those need to be refilled. And then there's basic logistics.
KEVIN BOOK: In addition, ships that aren't in the strait right now have to get there to take cargoes away. Those that are in there have to leave, so it might be a while. The market was in a significant surplus before the war. It's not obvious that we'll be in a surplus anytime soon.
DOMONOSKE: And this is an important point because those oil prices were actually unusually low right before this conflict started because the world had too much oil - was producing more than was demanded. That helped blunt the blow of this oil shock these past few months. And it's really not clear if getting back to quote-unquote, "normal" is going to mean a return to that level of oversupply.
MART脥NEZ: So what does this mean for people who drive and buy gas in the U.S.?
DOMONOSKE: Yeah, it's going to mean less expensive gasoline. This conflict had pushed prices at the pump up a $1.50. The last three weeks, prices had been falling, mostly because crude oil was getting cheaper, and that was mostly because of hopes for a deal just like the one that was just announced. So, if this sticks, definitely relief for drivers, especially compared to the worst-case scenario, which would be this conflict continuing to drag on and pushing up inflation. But, you know, it doesn't necessarily mean gas prices snap back to as cheap as they were before the U.S. and Israel attacked Iran.
MART脥NEZ: I'm in California, Camila, so it doesn't matter for me.
DOMONOSKE: I know.
MART脥NEZ: It's always expensive. NPR's Camila Domonoske. Thanks.
DOMONOSKE: Thank you. Transcript provided by NPR, Copyright NPR.
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