Oil Drops Near Pre-War Levels
Oil prices weakened again on Thursday, approaching levels last seen before the Iran war began. Brent for August delivery fell to around US$72–US$73 per barrel, while West Texas Intermediate (WTI) traded in the US$69–US$70 per barrel range. Both contracts hit their lowest levels since February 27, just before major conflicts in the Middle East triggered a surge in oil prices.
The main pressure came from expectations of increased Middle Eastern oil supply. The market began to anticipate that oil barrels from the Gulf region could return sooner than expected, as shipping flows through the Strait of Hormuz gradually recovered. US Energy Secretary Chris Wright said oil flows through Hormuz were approaching pre-war levels, with at least 20 million barrels leaving the strait in the past 24 hours. However, full normalization will still take time as the passage still needs to be cleared of mines.
The recovery of Hormuz was further strengthened after Oman opened a temporary route to help tankers escape the waterway. The International Maritime Organization and Omani authorities are coordinating ship movements to ensure safe shipping. On the diplomatic front, Qatar has also begun discussing the future management of the Strait of Hormuz with Oman, Iran, Iraq, and the Gulf states.
Beyond Hormuz, the potential for increased Iranian oil exports is also putting downward pressure on prices. The United States has temporarily relaxed its restrictions on purchases of already-loaded Iranian oil, leading the market to expect additional supply to enter the global market. This has led to lower prices for physical oil cargoes from various regions, as buyers begin to accept more supply offers from the Middle East and other regions such as Africa.
However, the market has not completely discounted the risk of tight supplies. Energy Information Administration data shows that total US crude oil inventories fell to their lowest level since 1984, driven by strong refinery demand and the release of government emergency oil reserves. However, this data has not been able to lift prices as traders' primary focus currently remains on the reopening of the Strait of Hormuz and the return of Middle Eastern supplies.
Macquarie analysts predict that oil prices could quickly return to pre-war levels as supply chains adjust and Hormuz reopens. They project Brent to average around US$67 per barrel and WTI around US$62 per barrel in the third quarter. This means that as long as Middle East supply continues to recover and there are no new disruptions in US-Iran negotiations, pressure on oil prices is likely to continue.(Asd)*
Source: Newsmaker.id
