Oil Drops, Hormuz Recovering?
Oil prices weakened again in the latest trading session after more tankers openly passed through the Strait of Hormuz. Brent fell below US$76 per barrel after previously weakening 1.1%, while West Texas Intermediate (WTI) hovered around US$74 per barrel on Wednesday (June 24). This decline occurred as the market perceived the risk of supply disruptions as easing after the United States and Iran signaled progress in peace talks.
Market confidence also increased as several ships began activating satellite signals while passing through the Strait of Hormuz. This move indicated that ship owners felt safer returning to the vital energy route. The International Maritime Organization also stated that it had received safety assurances that prevented hundreds of ships from leaving the Persian Gulf.
However, the process towards full normalization remains challenging. Washington and Tehran both claim initial progress toward ending the war that began in late February, but claims differ between the two sides. Iran and Oman have also begun discussing an agreement regarding the management of the Strait of Hormuz, including possible transit fees, although concerns remain that Iran could charge ships for passage.
Enverus oil and gas analyst Carl Larry believes the market is currently searching for a new price floor after the significant gains during the war have begun to erode. He believes the area around US$75 is a level the market is starting to pay attention to. However, many unanswered questions remain, ranging from how quickly supplies can be replaced, how long waiting times for oil to be loaded, to whether China will return to being a major buyer in the energy market.
Pressure on oil prices also comes from expectations of increasing global supply. Oil futures have fallen more than a hair from their wartime peaks, particularly after the United States authorized purchases of Iranian oil as part of the diplomatic process. Persian Gulf producers such as the United Arab Emirates, Kuwait, and Iraq have also begun moving quickly to restore exports. The United Arab Emirates has even returned to nearly 85% of its pre-war production levels, according to the International Energy Agency.
However, the market hasn't completely relaxed. In the United States, data from the American Petroleum Institute shows that crude oil stocks at the Cushing, Oklahoma, storage hub fell again by around 1 million barrels last week. If official data confirms the decline, Cushing inventories could fall below 20 million barrels, a level often considered the minimum operational limit. This means that even though geopolitical sentiment is improving and oil prices are weakening, the risk of tight supplies in some regions could still prevent further price declines. (asd)*
Source: Newsmaker.id
