Benchmark oil prices, including Brent crude, fell below $75 a barrel for the first time since the Iran war started in late February. This decline is attributed to a significant increase in oil tanker traffic through the Strait of Hormuz, with vessels now transiting with satellite signals on and the International Maritime Organization receiving safety guarantees. The US and Iran have indicated progress in peace talks, further contributing to market confidence.
The surge in supply has led to a collapse in prices for physical barrels, with the nearest Brent futures timespread showing weakness and premiums for various crude grades plummeting. Oil prices are down approximately 40% from their peak during the conflict. The United Arab Emirates alone has exported around 60 million barrels from the Persian Gulf in recent weeks, with the IEA estimating UAE exports at nearly 85% of pre-war levels.
US Energy Secretary Chris Wright confirmed that crude oil flows through the Strait of Hormuz are close to pre-war levels, with about 20 million barrels exiting the strait in a 24-hour period. He noted that while normal navigation might be delayed by mine clearance, Iran's ability to close the strait has been significantly diminished. Secretary Wright also mentioned that Venezuela's oil exports, now administered by the US, could double to around 2 million barrels per day by the end of President Donald Trump's administration in 2029.
Despite the overall decline, some market tightness remains, particularly in the US. Crude inventories at Cushing, Oklahoma, reportedly fell by another 1 million barrels last week, potentially dropping below the critical 20-million-barrel minimum operating level. Retail gasoline prices in the US have declined by 14% since late May, now below $4 a gallon, while retail diesel prices fell below $5 a gallon for the first time since mid-March. President Trump has ordered an investigation into why gasoline prices haven't fallen faster.
The oversupply is particularly evident in Europe and Asia, with Angolan crude selling at nearly $10 a barrel below Dated Brent. Some Chinese refiners have even been offering oil cargoes for sale, a reversal of normal trends. While the reopening of Hormuz has flooded markets, low global inventories and restocking needs could absorb some excess, leaving the system vulnerable to new disruptions.
