Oil Heads for Major Correction, Hormuz Remains Key
Oil prices are heading for their biggest quarterly decline since the COVID-19 pandemic began in early 2020. The market is still monitoring potential talks between the United States and Iran in Doha, amid a fragile ceasefire after four months of war.
The August Brent crude contract, which expires on Tuesday, rose 0.22%, or 16 cents, to US$73.31 per barrel at 12:01 GMT. However, the contract is still on track for its third consecutive monthly decline, having fallen by around 20% throughout June. Meanwhile, the more actively traded September contract rose 0.61%, or 45 cents, to US$74.36 per barrel.
U.S. West Texas Intermediate (WTI) crude for August also rose 0.52%, or 37 cents, to US$71.12 per barrel. However, WTI is still down around 19% throughout June and is heading for its second consecutive monthly decline. Throughout the quarter, Brent has weakened by about 38%, while WTI has fallen by about 29%, with both prices now approaching pre-war levels.
UBS analyst Giovanni Staunovo believes the market has not completely eliminated the risk premium. However, previously stranded vessels are now starting to become available again as the number of vessels leaving the Gulf increases. This situation has created a temporary supply glut, which is also putting downward pressure on oil prices.
Regarding the supply outlook, Morgan Stanley estimates that the global oil market could experience a surplus of 4.8 million barrels per day by 2027. This forecast adds pressure on oil prices, especially after the reopening of the Strait of Hormuz eased concerns about prolonged supply disruptions.
Meanwhile, Qatari officials stated that the US envoy who has arrived in Doha will not hold a high-level meeting with Iran. Instead, technical talks will be held this week, including discussing regional security issues that could later be escalated to a senior level.
The uncertainty over the continuation of these talks highlights the fragility of the June 17 agreement to halt the fighting. The conflict has disrupted global oil flows through the Strait of Hormuz and poses a political challenge for US President Donald Trump ahead of the November congressional elections.
Meanwhile, a Reuters poll showed analysts have begun cutting their 2026 oil price projections for the first time since the Iran war began. This cut comes after the reopening of the Strait of Hormuz eased market concerns about the risk of prolonged supply disruptions.
Meanwhile, Iraq's SOMO offered a substantial discount to its official selling price to encourage long-term buyers to source Basrah crude from terminals in the Gulf region in July. This move further reinforces the signal that supply pressure remains a major concern in the oil market. (gn)
Source: Newsmaker.id
