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(Bloomberg) — Oil held near a three-month low on expectations that a US-Iran deal to reopen the Strait of Hormuz will unleash a wave of supply.
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West Texas Intermediate traded below $77 a barrel, after sinking 16% over four sessions in the longest losing run this year. Global benchmark Brent ended below $79. The interim pact, which is due to be signed on Friday, offers Tehran broad financial incentives, including the right to sell its oil immediately.
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Crude prices have retreated sharply in recent weeks as moves to end the war between Washington and Tehran are seen easing tightness in global energy markets. Producers, shippers and traders are now assessing whether the agreement will prove to be durable, and how long it might take for transits of the Hormuz chokepoint to be revived.
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“Most traders still believe US naval operations will likely be escorting for the first few weeks, and mine-sweeping ships will also be present, which will slow the flow of traffic for at least a month,” said Dennis Kissler, senior vice president for trading at BOK Financial Securities Inc. “Still, the futures market is always looking in the distance, and for now the odds are increasing that oil will be moving.”
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While a revival in supply is expected, crude stockpiles have been drawing at a rapid pace. A US industry group estimated that US inventories sank by 8.3 million barrels last week, including a substantial drop at the key hub at Cushing, Oklahoma. Official data are due later on Wednesday.
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