Oil Prices Drop to Lowest Level Since March
Oil prices fell more than 1% in trading on Wednesday (July 1), hitting their lowest level since March. The decline occurred as optimism surrounding the United States and Iran talks in Qatar eased market concerns about energy supply disruptions from the Middle East.
Brent crude fell US$1.38, or 1.89%, to close at US$71.57 per barrel. Meanwhile, West Texas Intermediate (WTI) fell 92 cents, or 1.32%, to US$68.58 per barrel. Both global oil benchmarks recorded their lowest closes in four months.
United States President Donald Trump said relations between Washington and Tehran were going very well. He also described the recent meeting in Qatar as positive. These statements reinforced hopes that the two countries could maintain a temporary ceasefire and continue the process toward a more permanent agreement.
The United States and Iran held technical talks in Doha to discuss shipping flows through the Strait of Hormuz and efforts to secure a long-term ceasefire. The route is a major market concern because, before the war, approximately 20% of global oil supplies passed through the Strait of Hormuz.
Tanker flows through the Strait of Hormuz are beginning to recover. US Vice President JD Vance said oil flows through the route have returned to pre-war levels, though he did not provide specific figures. This recovery has further reduced the geopolitical risk premium in the oil market.
On the supply side, the Energy Information Administration reported that US crude oil stocks fell by 3.8 million barrels to 408.4 million barrels last week. This level was the lowest since September 2018, as domestic refinery demand increased ahead of the July 4th holiday. However, the decline in stocks was still smaller than analysts' expectations of a 4.5 million barrel decline.
Price pressure also came from changes in market projections. After five consecutive months of raising estimates, analysts began cutting their 2026 oil price projections for the first time since the Iran war began. The reopening of the Strait of Hormuz and improved supply flows have eased concerns about prolonged energy disruptions.
Brent fell by around US$45 per barrel throughout the second quarter, marking its largest quarterly decline since the 2008 global financial crisis. Meanwhile, WTI fell by around US$31 per barrel, recording its largest quarterly decline since the Covid-19 pandemic in 2020.
In addition to US-Iran diplomacy, the market is also closely monitoring OPEC+ plans. Three sources said oil-producing countries are likely to agree to an additional production target increase starting in August at a meeting on Sunday. If production is increased again, supply pressure could further restrain the oil price recovery.
Overall, the weakening oil price indicates that the market is increasingly confident that the risk of supply disruptions from the Middle East is starting to be contained. However, as long as a permanent US-Iran agreement remains pending and the situation in the Strait of Hormuz remains sensitive, oil prices remain potentially volatile in the short term. (arl)
Source: Newsmaker.id
