Benchmark U.S. oil prices dropped more than four per cent on Monday, pulling down Canadian energy stocks, as a conditional agreement between the United States and Iran triggered promises from President Donald Trump that the critical Strait of Hormuz will reopen.

Prices for West Texas Intermediate (WTI) crude fell more than $4 to close at US$80.75 a barrel on news the two sides in the war had reached a deal. Final details have yet to be disclosed, although it reportedly includes 60 days for the two countries to iron out key issues surrounding Iran’s nuclear program.

Industry executives and analysts predict it will take time for production in the Middle East — and global inventory levels — to return to pre-war levels.

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“It feels over like an overreaction to me, only because all this does is this gives them 60 days to work on a deal,” Saturn Oil & Gas CEO John Jeffrey said Monday in an interview.

“There is a lot of hope right now that the strait is reopening, that the tide has turned, and it is very positive news. But it doesn’t change the fact that we’ve been in this (situation) for four months now, and it’s going to take time to replenish those inventories,” added ATB Financial chief economist Mark Parsons.

The war, which started at the end of February, effectively blocked shipments from the Strait of Hormuz, through which about 20 per cent of the world’s oil and liquefied natural gas normally........

© Calgary Herald