Brent crude oil prices have dropped below $75 a barrel, reaching their lowest point since the start of the Iran war in late February. This decline is attributed to a significant increase in oil tanker traffic through the Strait of Hormuz, signaling improved supply and growing confidence among shipowners. Both the US and Iran have indicated progress in peace talks aimed at ending the conflict.
The International Maritime Organization has also confirmed receiving safety assurances, allowing hundreds of ships to depart the Persian Gulf. This easing of tensions and increased traffic has led to a collapse in prices for physical barrels, with the nearest Brent futures timespread showing weakness and premiums for North Sea to West Africa barrels tumbling. Oil prices are now down approximately 40% from their peak during the conflict.
Several factors are contributing to the downward pressure on prices, including a 60-day sanctions waiver granted to Tehran by Washington, allowing Iran to sell oil, and an easing of hostilities in Lebanon. The United Arab Emirates is already exporting oil at nearly 85% of pre-war levels, and Iranian crude exports, which had fallen to 329,000 barrels per day in May (85% below February's 2.2 million bpd), are expected to surge. Wall Street banks like Morgan Stanley and Goldman Sachs have reduced their oil price forecasts for the coming quarters due to the anticipated revival of Middle East crude output.
Despite the global price drops, some markets show signs of tightness. The American Petroleum Institute (API) reported a 1 million barrel fall in crude inventories at Cushing, Oklahoma, last week, pushing stockpiles below the 20-million-barrel minimum operating level. US retail gasoline prices have declined 14% since late May to below $4 a gallon, while retail diesel prices are now below $5 a gallon, marking the first time since mid-March. However, these figures remain above the five-year seasonal average, prompting former President Trump to question why gasoline prices haven't fallen faster.
