An impending surge of approximately 62 million barrels of crude oil, currently held by 31 supertankers stuck inside the Persian Gulf, is poised to enter the Asian market. This influx follows a US-Iran interim peace deal that is enabling the reopening of the Strait of Hormuz, a crucial shipping lane. Experts warn that this "wave" of oil could swamp Asian refiners, who have already secured sufficient supplies for the coming months and have reduced processing rates due to decreased demand from high prices.
Evidence of the Strait's reopening includes the movement of Saudi Arabian tankers. At least three supertankers (Shaden, Jaham, and Awtad) owned by Saudi Arabia's Bahri, which had been stranded in the Persian Gulf for months, have exited the Strait of Hormuz and appeared in the Gulf of Oman. Additionally, at least four other Saudi oil supertankers, previously idling in the Indian Ocean, have set sail toward the Gulf of Oman, signaling an anticipated resumption of flows through the strait. A Qatari liquefied natural gas vessel and a Chinese fuel tanker have also reportedly exited the Strait.
This increased supply is already impacting oil prices, with the forward curve for benchmark Middle Eastern crudes like Dubai and Murban shifting into a bearish contango pattern for the first time since the war began. Oman crude is now priced at a discount to its underlying Dubai benchmark, a reversal of its usual premiums. Some refiners, like one in South Korea, are offering larger-than-usual amounts of distillate fuel (diesel and jet fuel) for sale, preparing for potential price declines as the market becomes saturated. While some analysts anticipate a normalization of Persian Gulf exports to pre-war levels by the end of July, Goldman Sachs Group Inc. suggests that flows through the Strait of Hormuz may only recover to about 70% of their pre-war levels, as regional producers increasingly utilize alternative routes.
