PERTH - Oil prices fell on Friday on the prospect of more supply returning to the market after oil tankers began to move through the Strait of Hormuz following the signing of the US-Iran interim peace deal.

Brent crude futures fell 54 cents, or 0.68%, to $78.31 a barrel as of 01:46 GMT. US West Texas Intermediate crude slipped 46 cents, or 0.60%, to $76.14 a barrel.

The front-month July contract expires on Monday. The more actively traded August contract was at $75.06 a barrel, down 79 cents.

Both benchmarks touched their lowest since early March on Thursday as several tankers, including three Saudi-flagged vessels with six-million barrels of crude onboard, sailed through the strait hours after US President Donald Trump signed a deal with Iran to end their war.

Analysts expect the deal to release more than 85-million barrels of oil stranded in the Middle East Gulf into global markets. The agreement also includes the lifting of US sanctions on Iranian oil which would add more supply.

"Traders are still waiting for hard evidence that tanker traffic through the Strait of Hormuz is actually normalising before committing to the next leg lower," KCM chief market analyst Tim Waterer said.

"Until those ships start moving consistently again, scepticism lingers and keeps a lid on the downside."

Prior to the war, roughly one-fifth of the world’s oil and liquefied natural gas transited through the strait, and analysts have suggested trade could return to normal in the coming months if the US-Iran deal holds.

Middle East producers are also gearing up to resume exports.

Kuwait Petroleum Corp said on Thursday that all force majeure notices issued during the war have been lifted with immediate effect.

Iraq's Oil Minister Basim Mohammed said the country's oilfields are ready to resume production and a return to normal output levels will take place gradually until previous production rates are restored.

However, Israel has continued its war against Hezbollah in Lebanon, raising questions about whether the US-Iran peace
agreement would hold.