Oil prices fell to their lowest since before the Iran war began, as expectations of rising supply from the Middle East outweighed demand concerns. Prompt-month Brent crude futures for August delivery dropped $1.06, or 1.44 percent, to $72.68 a barrel by 06:39 GMT, while US West Texas Intermediate (WTI) lost 76 cents, or 1.08 percent, to $69.58 a barrel. Both contracts hit their lowest since February 27.
Brent and WTI Decline on Supply Outlook
August Brent was trading lower than September, which was priced at $73.59, indicating ample short-term supply. On Wednesday, Brent had fallen by more than $3 as supply concerns eased, while WTI settled down nearly $3. US Energy Secretary Chris Wright told a forum that flows through the Strait of Hormuz were close to those before the start of the Iran war, with at least 20 million barrels having exited the strait in the past 24 hours. He added that a return to complete normality would take a few weeks because the strait needs to be cleared of mines.
Middle East Supply and Iran Sanctions Reprieve
Rising Middle East supply, together with Iran set to boost sales after a temporary reprieve from US sanctions, drove down prices of physical crude oil cargoes around the world. An initial accord last week to end the US-Israeli war with Iran, which began on February 28, has allowed the resumption of traffic through the strait. The accord set up a 60-day period of negotiations to tackle tougher issues, such as Iran’s nuclear programme.
Wright: Oil Will Flow Even if Deal Fails
Wright said oil would continue to flow through the strait even if the deal did not hold, and that Iran would not be able to close it again. Tehran has said it plans to impose what it calls maritime service fees, as opposed to tolls, while the United States argues it is an international waterway and therefore should not be charged. Oman opened temporary routes on Wednesday to ease tanker departures from the strait, with the International Maritime Organization and Omani authorities coordinating movements.
Iranian Guards Warn Against Unauthorized Crossings
On Thursday, Iran’s Revolutionary Guards warned against any crossings of the Strait of Hormuz without authorisation, saying vessels not complying “will be dealt with” and condemning the new routes.
