Oil prices are stabilizing, and the earlier gains from wartime conditions are diminishing as Iranian and US peace agreements have allowed tankers to openly traverse the Strait of Hormuz. Ellen Fraser, an Energy expert at Baringa Partners, highlighted these shifts, particularly noting the US decision to permit Iran to re-enter the open oil market.
Following the peace deal, the flow of oil through the Strait of Hormuz has intensified significantly. Over a recent three-day period, approximately 20 million barrels of crude oil passed through the waterway, marking the highest transparent flow since before the war began. Iran alone contributed 6 million barrels to this surge. This increased transit includes previously stranded tankers, with three alone carrying 5 million barrels of crude oil, signaling a substantial increase in global supply. These tankers include the VL Breeze, chartered by Hyundai Oilbank, carrying 2 million barrels of Qatari condensate and Abu Dhabi crude to Daesan, and the VLCC Plata Carrier, chartered by Indian Oil Corp, carrying 2 million barrels of Saudi crude.
The reintroduction of Middle Eastern barrels to the market is contributing to the easing of US physical crude prices. The risk premium that had elevated US crude prices during the conflict is rapidly diminishing, as expectations for a supply revival through the Strait of Hormuz strengthen. Key Gulf Coast export grades that had surged are now weakening as a result. Despite the increase, oil flows through the strait are estimated at 6-7 million barrels per day, still below the pre-war level of 20 million barrels per day but moving towards the 14 million barrels per day needed to restore pre-war supply when considering pipeline diversions by Saudi Arabia and the UAE.
The global market is seeing a substantial release of previously held-up crude. Analysts from Kpler and Vortexa had estimated nearly 90 million barrels of crude were stranded in the Gulf. This new supply, combined with the removal of export restrictions for Iran, has led to a softening of global oil prices. The recovery of flows through Hormuz has also spurred activity for LNG tankers, with nine empty LNG ships transiting the strait to load cargoes from Qatar, and Qatar's Prime Minister anticipating a return to normal LNG production within a few weeks.
