Oil Prices Stable, Market Monitors US-Iran Peace and Hormuz Supply
Oil prices rose slightly in trading on Friday (July 3), but remained relatively unchanged on a weekly basis. Market participants remain hopeful that peace efforts between the United States and Iran can be successful and maintain stable energy supplies.
Brent crude rose 25 cents, or 0.35%, to US$72.05 per barrel. Meanwhile, West Texas Intermediate (WTI) crude moved almost flat, rising 1 cent to US$68.70 per barrel. This limited movement occurred as US markets closed early ahead of the Independence Day holiday.
In trading on Thursday, both oil benchmarks briefly touched their lowest levels since before the US-Israel war against Iran began in late February. The decline reflected a reduction in geopolitical risk premiums after some shipping flows through the Strait of Hormuz resumed.
Some shipping activity has resumed through the Strait of Hormuz in accordance with the initial agreement between the United States and Iran. However, uncertainty remains high after the two countries exchanged blows last weekend, following an Iranian attack on a cargo ship.
With the oil shipping outlook improving, Gulf producers have begun to ramp up production. Kuwait reportedly sharply increased its oil production to 1.65 million barrels per day in June, from 580,000 barrels per day in May.
In addition, at least five supertankers carrying a total of 10 million barrels of Saudi oil have exited the Strait of Hormuz. Saudi Aramco has also switched to spot pricing from long-term contracts to accelerate sales to Asian markets.
The increase in supply availability has shifted the oil market structure from backwardation to contango. This condition occurs when short-term contract prices are lower than long-term contracts and typically reflects expectations that the market is no longer overly concerned about a near-term supply shortage.
The spread between the next-month Brent contract and the six-month forward contract also turned negative on July 1 for the first time this year. This signal reinforces the view that the market is beginning to face tighter supply as oil flows from the Persian Gulf resume.
However, geopolitical risks have not completely disappeared. US-Iran talks remain fragile, and the issue of shipping controls in the Strait of Hormuz remains a sensitive point. If negotiations fail or attacks on ships recur, oil prices could still potentially surge as risk premiums could return to the market.
Overall, oil prices are currently stable near pre-war levels. If the Hormuz flow continues to improve and Gulf production increases, supply pressures could restrain price increases. However, the future direction will still depend heavily on the outcome of US-Iran diplomacy, the production policies of Gulf producers, and demand from Asia, particularly China. (arl)
Source: Newsmaker.id
