Oil Under Pressure, Hormuz Deal Changes Supply Direction
Oil prices are headed for their longest losing streak this year after the US-Iran agreement to reopen the Strait of Hormuz altered market expectations regarding global supply. On Tuesday (June 16), Brent fell below US$83 per barrel and weakened for a fourth day, while WTI hovered around US$80 per barrel. The interim agreement is scheduled to be signed in Switzerland on Friday, although Washington and Tehran have not yet released the official text of the memorandum.
Selling pressure emerged as the market began to assess the potential for a faster recovery in oil supplies from the Persian Gulf. President Donald Trump said the Strait of Hormuz would be cleared and reopened by Friday, even suggesting several routes were already available. This statement reinforced expectations that barriers to oil exports from the region would ease after being disrupted by the war and the dual blockade by Iran and the US.
Several major Wall Street banks also adjusted their oil price projections. Morgan Stanley cut its July-September Dated Brent forecast to an average of US$90 per barrel, from US$100 per barrel previously, and lowered its fourth-quarter outlook to US$80 per barrel. Goldman Sachs also cut its outlook, assuming Persian Gulf exports could return to pre-war levels by the end of July, one month earlier than previously expected.
However, the market has not completely abandoned risk. Many details of the agreement still need to be negotiated, including shipping security, operational rules, and whether the Strait of Hormuz will truly be free of tolls. This waterway carried about a fifth of the world's pre-war oil supply, making operational certainty key for shipping companies, traders, and oil buyers before supply flows fully return to normal.
Market structure is also showing signs of change. The price spread between the two nearest Brent contracts narrowed to around US$0.83 per barrel on Tuesday, significantly smaller than more than US$4 per barrel a month ago. Backwardation persists, but the narrowing spread suggests that perceptions of tight supply are easing as hopes for a recovery in Persian Gulf exports grow.
Fundamentally, the decline in oil could help mitigate the risk of energy inflation and ease pressure on central banks, including the Federal Reserve, which is assessing the direction of interest rates this week. However, as long as the text of the agreement remains unreleased and Hormuz flows have not returned to normal, volatility is likely to persist. The next market focus will be on Friday's signing, the International Energy Agency's monthly report, the volume of vessels passing through, and the pace of export recovery from the Persian Gulf. (asd)*
Source: Newsmaker.id
