Oil prices have retreated significantly, erasing earlier wartime gains, as the Strait of Hormuz has seen a rapid increase in traffic following an agreement between Iran and the United States to end their conflict. On Friday, Saturday, and Sunday, approximately 20 million barrels of crude passed through the waterway, marking the highest transparent flow since before the war began in late February. Iran itself contributed 6 million barrels this morning. This surge in supply, coupled with the US temporarily allowing the purchase of Iranian oil, has alleviated concerns over Middle Eastern supplies.
The reopening of the strait has led to a decrease in physical US crude prices, with key Gulf Coast export grades weakening. West Texas Intermediate (WTI) traded near $73 a barrel, while Brent crude closed above $77. Analysts like Carl Larry from Enverus suggest the market is finding a bottom near $75, despite questions remaining about replacing supply and loading wait times. The increased confidence among shipowners is evident as tankers are now transiting the strait with their satellite signals openly switched on.
In addition to crude, stranded liquefied natural gas (LNG) tankers are also beginning to move through the strait. Three stranded crude tankers carrying 5 million barrels have also exited the Strait, including the VL Breeze with 2 million barrels of Qatari condensate and Abu Dhabi crude heading to South Korea, and the VLCC Plata Carrier with 2 million barrels of Saudi crude destined for India. Overall, analysts from Kpler and Vortexa had estimated close to 90 million barrels of crude were stuck inside the Gulf previously. Qatar's Prime Minister has stated that normal LNG production will resume within a few weeks. The International Maritime Organization has received safety guarantees, enabling hundreds of vessels to exit the Persian Gulf.
While early progress in discussions between the US and Iran to end the war has been flagged, further and potentially protracted talks are anticipated. Both the Islamic Republic and Oman are commencing work on a pact for the administration of Hormuz, which includes managing transit costs and addresses concerns that Tehran might levy a fee. Domestically, the Republican-led Senate voted to end the US war with Iran, a symbolic move indicating waning support for the administration's strategy. Despite the influx of oil, there are signs of tightness in some markets, such as the US, where crude inventories at Cushing, Oklahoma, reportedly fell by another 1 million barrels last week, potentially dropping below the 20-million-barrel minimum operating level.
