Oil Prices Plummet as War Risks Ease
Oil prices weakened again on Wednesday (June 24th), as more tankers began openly transiting the Strait of Hormuz. Brent fell to around US$75 per barrel, while West Texas Intermediate (WTI) hovered below US$72 per barrel. This decline occurred as the market perceived the risk of energy supply disruptions from the Persian Gulf region as easing after the United States and Iran signaled progress in talks to end the war.
Signs of recovery were seen in the increasing number of ships activating satellite signals while passing through the Strait of Hormuz. This indicates that shipowner confidence is improving, especially after the International Maritime Organization received safety assurances allowing hundreds of vessels to exit the Persian Gulf. If ship traffic returns to normal, market concerns about a global oil shortage could further ease.
However, the diplomatic process has not been entirely smooth. Washington and Tehran have both cited initial progress, but claims remain divergent. The market is also closely monitoring discussions between Iran and Oman regarding the management of the Strait of Hormuz, including concerns that Iran could impose transit fees. This issue is crucial because the Strait of Hormuz is a vital route for global oil and gas trade.
Oil price pressures are also intensifying as physical supplies begin to show signs of recovery. The International Energy Agency estimates that the United Arab Emirates has exported nearly 85% of its pre-war oil levels. In recent weeks, the UAE has also reportedly sold around 60 million barrels of oil from the Persian Gulf. This return of supply has caused the market to unwind the war risk premium that had previously driven oil prices sharply higher.
In the physical market, signs of weakness are increasingly visible. The price spread between the nearest Brent contract has narrowed sharply, indicating that supply concerns are easing. Premiums for oil from the North Sea to West Africa have also declined, indicating that buyers are no longer willing to pay the high prices they did at the height of the conflict. Oil prices have now fallen by around 40% from their wartime highs, as shipping traffic slowly recovers.
However, the risks have not completely disappeared. In the United States, oil stocks at the Cushing, Oklahoma, storage hub reportedly fell by another 1 million barrels. If official data confirms the decline, Cushing inventories could fall below 20 million barrels, often considered the operational minimum. This means that even if geopolitical tensions weaken oil prices, tight supplies in some regions could still prevent further price declines. (arl)
Source: Newsmaker.id
