Crude Slides on Rising Supply
by Bloomberg | R.W. Neo, A. Longley, C. Charleston
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Oil declined with shipping traffic through the Strait of Hormuz picking up amid hopes for a permanent US-Iran peace deal and new warnings of a near-term glut.
West Texas Intermediate settled 1.8% lower at around $70 a barrel. Global benchmark Brent’s more-active September contact settled near $73 a barrel. Front-month futures are down by almost a third this quarter, the biggest decline since 2020, after the US and Iran’s interim deal reopened Hormuz to bottled up supply.
As more ships are able to transit the vital energy chokepoint, barrels are being pushed further afield, with the oil market trying to absorb the additional volumes at the same time that major workarounds from the war are still in place.
“The oil market is remaining under pressure from the expectations of heavier global supplies from both the Middle East and Asian fuel exports resurfacing,” said Dennis Kissler, head of energy trading at BOK Financial Securities Inc. “If you add in that US driving season normally peaks in two weeks, it’s hard to find a reason to be a buyer in here.”
Morgan Stanley cut oil forecasts for the second time in about two weeks as flows via the strait, through which about a fifth of global oil transited before the Iran war, return faster than expected. The bank also cut its price forecasts for a physical benchmark by a sixth for next quarter, warning that flows through Hormuz only need to recover to about 65% of the pre-conflict level for a glut to form.
“As attention turns to 2027, the market has come full circle — back to surplus,” the report said.
In a recent sign of price weakness, oil was offered in the North Sea at its biggest discount in years on Monday, and the Dated Brent physical benchmark has tumbled.
On the diplomatic front, Qatar said US officials had arrived in Doha as part of ongoing peace negotiations between the US and Iran and as the countries try to calm tensions over the strait that flared over the weekend.
Iran, for its part, reiterated its determination to control maritime traffic through Hormuz, but shipments showed signs of accelerating again following recent attacks in the waterway.
Iran has also received sanction waivers from the US to sell its oil, sending more supplies to the market. Prices managed to avoid the worst-case scenarios at the peak of the Mideast crisis thanks to record emergency stockpile releases, a plunge in Chinese crude imports and higher US overseas shipments.
Meanwhile, Russia’s oil exports are surging to record highs, causing a buildup in seaborne crude amid tumbling prices for Moscow’s key revenue earner.
Oil Prices
Oil prices fell as shipping through the Strait of Hormuz increased and traders anticipated a growing global supply surplus.
- Brent for September settled 1.3% lower at $72.95 a barrel
- The less active August contract expires on Tuesday
- WTI for August delivery fell 1.8% to settle at $69.50 a barrel
by Bloomberg | R.W. Neo, A. Longley, C. Charleston
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas