Oil Price Falls on Improved Diplomacy, Analysts Warn of Continued Disruption

The price of Brent crude oil has fallen to around $78 a barrel after hopes for a Hormuz agreement reduced the risk premium, but Natixis warns that shipping flows are still far from normal.

Oil prices have eased sharply as diplomacy around the Strait of Hormuz has improved, but analysts at Natixis say the physical disruption has not disappeared. Brent fell to around $78 a barrel on August 6 from $83 on July 31, with the bank saying 'Hormuz deal hopes reduced the risk premium'.

The drop fits the wider price action. OIL/USD was around $77.08 at the weekend, still up more than 34% since the start of the year but well below the spring highs above $110.

Natixis says the diplomatic tone has changed meaningfully over the past week. Since last week, diplomacy has regained momentum,' the bank said, noting that President Trump held off fresh strikes on August 1-2 after regional partners requested more time to pursue an agreement.