Oil Prices Drop, Strait of Hormuz Monitored
World oil prices fell more than US$1 in Tuesday's trading, as market participants re-monitored crude oil flows through the Strait of Hormuz. This movement occurred amid signs of progress in peace talks between the United States and Iran, which have begun to ease concerns about disruptions to global energy supplies.
The Brent crude oil contract fell US$1.18, or around 1.2%, to US$76.72 per barrel. Meanwhile, US West Texas Intermediate (WTI) crude fell US$1.18, or 1.6%, to US$72.68 per barrel at 10:06 a.m. local time (14:06 GMT). Previously, WTI had touched a nearly four-month low of US$72.48 per barrel.
Pressure on oil prices has been evident since Monday's trading, when prices fell more than 3%. The decline occurred after the United States granted Iran a 60-day exemption from sanctions following the initial stages of peace talks. Additionally, officials also reported a easing of hostilities in Lebanon as part of a broader agreement.
From the Gulf region, Oman and Iran agreed on Tuesday to resume discussions on the future management of navigation in the Strait of Hormuz. These discussions include maritime services in the strategic waterway and associated costs. Meanwhile, a limited number of vessels are reportedly being allowed to pass through the strait daily in coordination with the Iranian Revolutionary Guard Corps Navy.
Ship tracking data shows two previously detained supertankers passed through the Strait of Hormuz on Tuesday. Furthermore, seven empty liquefied natural gas (LNG) tankers linked to Qatar have also entered the strait in recent weeks. This is an early sign that gas shipments from the Gulf region may be resuming.
United States President Donald Trump stated that approximately 19 million barrels of oil flowed out of the Strait of Hormuz on Monday. He also highlighted the decline in oil prices in a social media post on Tuesday. However, SEB Research market analyst Ole Hvalbye believes that short-term sanctions relief will not significantly impact oil prices because the US-Iran memorandum of understanding is still relatively new and fragile.
The Strait of Hormuz is a crucial junction for global energy markets, as approximately one-fifth of the world's oil and LNG supplies pass through it. However, the war that closed the strait for more than three months has removed millions of barrels of oil and gas from the market. PVM Oil Associates analyst Tamas Varga believes that ship owners and operators still need assurances that the mine threat has been completely eliminated. Furthermore, damaged ports, debris in the waters, and potential congestion remain obstacles to a full increase in ship traffic.
On the supply side, Iraq has also increased production from its southern oil fields to around 2.1 million barrels per day, as more tankers prepare to load crude from Gulf export terminals. Meanwhile, Rabobank cut its oil price forecast due to the reduced risk of disruptions in the Gulf region. The agency now forecasts Brent to reach US$79 per barrel in the third quarter and US$78 per barrel in the fourth quarter.
Despite the depressed oil prices, geopolitical risks have not completely disappeared. Lebanon's Hezbollah accused Israeli forces of firing on civilians in southern Lebanon on Tuesday and considered the incident a violation of the ceasefire agreement. In the United States, the market is also awaiting energy inventory data. According to a preliminary Reuters poll, crude oil, gasoline, and diesel inventories are expected to fall last week, with the average forecast for a decline in crude stocks of around 5 million barrels for the week ending June 19. (gn)
Source: Newsmaker.id
