Key facts
- Oil futures are poised for their fourth consecutive weekly decline.
- The tentative reopening of the Strait of Hormuz and increased oil flows are pressuring prices.
- Brent crude is trading in the low $70s per barrel, and WTI crude is below $70.
- A U.S.-Iran memorandum and the reopening of the Strait of Hormuz have eased concerns about immediate supply shortages.
- The Brent futures curve is moving further into contango, signaling reduced immediate supply worries.
- Saudi Arabia is estimated to have exported over 10 million barrels of crude through the Strait of Hormuz recently.
Oil futures were on track for their fourth consecutive weekly loss as of Friday morning, influenced by the tentative reopening of the Strait of Hormuz and an increase in oil flows, which are easing concerns about supply shortages. In Asian trading, both Brent and West Texas Intermediate (WTI) benchmarks saw gains of approximately 0.5% amid some profit-taking, though prices remain near pre-war levels, with Brent trading in the low $70s per barrel and WTI below $70.
The market sentiment has shifted towards bearishness following a U.S.-Iran memorandum aimed at negotiating a deal and the subsequent reopening of the Strait of Hormuz. Analysts suggest that oil is in oversold territory. This development has prompted hopes for a jump in immediate physical supply in the coming weeks.
ING's commodities strategists, Warren Patterson and Ewa Manthey, noted that the increase in oil flows is exerting pressure on the front end of the ICE Brent forward curve. The curve is moving further into contango, a market structure indicating that concerns about immediate crude supply shortages have significantly eased. Gulf producers, including Iran, are reportedly rushing to ship oil out of the Strait of Hormuz before the negotiation window expires in August. Saudi Arabia is estimated to have exported over 10 million barrels of crude through the Strait of Hormuz in recent days, with supertankers loading oil from the Ras Tanura port and the country ramping up exports to Asia.