Since the signing of the end-of-war memorandum of understanding (MOU) between the United States and Iran, crude oil supply through the Strait of Hormuz has rapidly normalized, and international oil prices have returned to pre-war levels. Market analysts suggest that beyond a simple price drop, the geopolitical risk premium that had been priced in during the war is quickly disappearing.
On the 24th (local time), Brent crude for August delivery closed at $73.74 per barrel on the ICE Futures Exchange, down 4.33% from the previous session. West Texas Intermediate (WTI) for August on the New York Mercantile Exchange (NYMEX) fell 3.92% to close at $70.34 per barrel. Both Brent and WTI are at their lowest levels since February 27, just before the US-Iran war began.
International oil prices have been falling for four consecutive days, following the first high-level follow-up talks between the US and Iran on June 21-22 (local time) in Switzerland, after which they began working-level consultations for 60 days of main negotiations. Iran agreed to keep the Strait of Hormuz open without tolls during the talks, and the US also allowed Iranian crude oil exports for 60 days, alleviating supply disruption concerns.
Actual supply is recovering quickly. According to vessel tracking data, three oil tankers that had been stranded in the Strait of Hormuz during the war exited the strait on that day carrying a total of 5 million barrels of crude oil. Two of them are believed to be heading to Asia.
US Energy Secretary Chris Light also stated that approximately 20 million barrels of crude oil passed through the Strait of Hormuz in the past 24 hours, indicating a return to pre-war traffic levels.
The market is paying more attention to changes in the futures market structure than the simple drop in oil prices.
Neil Crosby, head of research at commodity analysis firm Sparta Commodities, diagnosed, "A large volume of physical crude oil from the Arabian Gulf is expected to flow into the market, and we are now in a ‘mini supply glut’ phase where demand needs to be pulled back."
Bob Yager, director of energy futures at Mizuho, also said, "Oil from the Middle East is pouring into the market, and selling volumes are rapidly increasing, especially around the August contract."
Changes are also being detected in the spot market. Spot crude oil traded around the world has begun trading at discounts, and global crude oil trade flows are being readjusted to reflect increased supply from the Middle East.
In addition, the US granting a 60-day sanctions waiver on Iranian crude oil and petrochemical product exports until August 21 has further boosted expectations of increased supply.
The market believes that if Iranian crude oil returns to the international market in earnest, it could become a new variable for the OPEC+ production cut strategy centered on Saudi Arabia.
