Oil prices extended their losses for a third consecutive day, with Brent futures trading below $71 a barrel and West Texas Intermediate around $68. This drop follows increased oil flows through the Strait of Hormuz, which are now exceeding 10 million barrels a day, according to a US official. The rising supply through this critical waterway comes as indirect talks between the US and Iran show signs of progress, aiming to de-escalate tensions and potentially address Iran's nuclear program and regional conflicts.
The recovery in supply is significant, with Saudi Arabia and the United Arab Emirates ramping up exports. Saudi Arabia has increased its shipments to almost 90% of pre-war levels, with four supertankers carrying about 8 million barrels of crude having exited the Strait of Hormuz from its Ras Tanura terminal. The UAE, which left OPEC in May, has boosted its exports to over 3.9 million barrels per day, reaching its highest rate since 2017. These increases, combined with strategic petroleum reserve releases, are contributing to a bearish market sentiment and a potential supply surplus.
Despite the improved flow, Iran reiterated its determination to control shipping through the Strait of Hormuz ahead of the Qatar talks. Analysts like Saul Kavonic from MST Marquee suggest that the Islamic Revolutionary Guard Corps might be reluctant to give up this leverage, as it represents their main point of influence over the global economy. Neil from Vanda Insights noted that while the transit regime is stable, some backlogs remain unresolved.
The decline in oil prices also reflects the lowest US stockpiles since March 2025, with inventories (excluding strategic reserves) around 1.2 billion barrels after 12 straight weeks of declines. The ongoing negotiations, which aim to finalize a deal to permanently reopen the strait and curb Tehran's nuclear program within a 60-day ceasefire window, are a key factor driving market sentiment. The market is also seeing a "bearish contango" price structure, signaling a short-term oversupply with discounts on immediate contracts.
