Oil Holds Near Prewar Lows
by Bloomberg | W. Kubzansky, P. Prem
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Oil prices steadied near pre-war lows as traders covered some bearish bets ahead of a US holiday weekend.
US benchmark West Texas Intermediate ticked 0.2% higher to settle below $69 a barrel, with a key indicator flashing signs of oversupply for the first time since November and flows surging from the Persian Gulf through the Strait of Hormuz. Brent futures ended the day up slightly, settling below $72 a barrel, hitting their lowest since the week before the Iran war began on Feb. 28.
Crude oil flows through the Strait of Hormuz surged to 14 million barrels on July 1, according to data compiled by Bloomberg. That’s in addition to bypass cargoes from Saudi Arabia’s Red Sea coast and the UAE port of Fujairah, which have been exporting about 6.2 million a day between them.
While a single day’s flows offer only a very limited snapshot, they nevertheless demonstrate how fast oil supply from producers in the Persian Gulf can rebound. The collective rate of exports via Yanbu, Fujairah and Hormuz stood at about 18 million a day in February.
The result of the pickup in exports — Saudi Arabia’s flows have hit 90% of their prewar rates — has been a gush of oil into the market at a time when many of the wartime supply workarounds are still in place, including releases of emergency reserves and depressed imports by China.
Brent futures are trading in a bearish contango price structure that signals short-term oversupply, with discounts on the closest contracts. Premiums for physical crude have also plunged in recent days.
“A wave of oil is about to enter the market,” said Natasha Kaneva, head of commodities research at JPMorgan Chase & Co. “And here lies the paradox. The surge in oil supply is about to collide with a market that, at least for now, simply does not need it.”
Brent futures have continued to decline after their biggest quarterly drop since the pandemic in 2020, with a loss of more than 40% from their peak at the height of the war. Flows through Hormuz — which connects Persian Gulf producers to global buyers — continued despite tensions over the weekend, allaying fears of an oil-led inflationary spike.
Oil Prices
Oil prices steadied as rising exports through Hormuz reinforced concerns about a growing global supply surplus.
- WTI for August delivery rose 0.2% to settle at $68.69 a barrel.
- Brent for September settlement rose 0.3% to settle at $71.80 a barrel.
“The market is currently being flooded with crude oil,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “Ample volumes of oil are putting pressure on the front end.”
Hormuz flows jumped soon after the interim peace deal, only to decline again following a couple of attacks on commercial ships. Wednesday’s Hormuz tally was the highest since June 24, when shipments through the waterway reached 18 million barrels.
How quickly the immediate supply glut dissipates will depend on a rebound in buying from China, and the pace that other governments choose to replenish depleted inventories, JPMorgan said. Total US stockpiles have fallen to the lowest level since March 2025, with inventories excluding strategic reserves at around 1.2 billion barrels after 12 straight weeks of declines.
And some hints of geopolitical risk still remain in the market. The US and Iran have yet to iron out a permanent peace deal. Qatar said the next set of indirect talks between the two sides would be scheduled at the earliest possible time following the funeral processions for Iran’s former Supreme Leader Ali Khamenei, who was killed in an air strike at the start of the conflict. Ceremonies are expected to begin July 4 and continue for days, according to Iranian state-run media.
Ahead of the Qatar talks, Iran reiterated its determination to control shipping through Hormuz, one of several sticking points that include the Islamic republic’s nuclear program and fighting in Lebanon.
In a sign of a developing post-war equilibrium, some leading European powers now accept that ships transiting Hormuz will have to pay fees to Iran and Oman, people familiar said.
by Bloomberg | W. Kubzansky, P. Prem
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas