Key facts
- Oil prices have fallen to levels not seen since before the Iran war.
- Tanker traffic through the Strait of Hormuz has gradually resumed.
- US gasoline prices have declined for six consecutive weeks.
- ADNOC cut its Murban crude official selling price for July to $101.48 per barrel.
- The futures curve structure for key Middle Eastern benchmark crudes flipped to contango.
- Analysts warn of critically low global oil inventories despite increased traffic.
Oil prices have fallen to levels not seen since before the Iran war as tanker traffic through the key Strait of Hormuz shipping route gradually resumes. ADNOC, the national oil company of Abu Dhabi, has cut the official selling price for July for its flagship Murban crude to $101.48 per barrel, down from $104.44 a barrel for June, amid weakening international and Middle Eastern benchmark oil prices. ADNOC has also priced its other grades, Umm Lulu, Das, and Upper Zakum, at par with Murban at $101.48 per barrel for July.
Prices of both Brent Crude and the Middle Eastern benchmarks have sunk over the past week after the U.S. and Iran announced a memorandum of understanding to launch peace talks and reopen the Strait of Hormuz, and the U.S. lifted its blockade in the Gulf of Oman that targeted to stop Iran’s oil exports. The slide in Murban prices and other key Middle Eastern crudes comes as market concerns about tight supply eased. The benchmark crude grades of the Middle East slumped last week as the U.S.-Iran deal raised hopes that supply from the top oil-exporting region would begin to recover soon.
As a result of the eased concerns about prompt crude supply from the region, the key benchmark crudes, Dubai and Murban, saw their futures curve structure flip to contango last week, for the first time since the war began on February 28. The contango structure suggests that concerns about the immediate lack of crude supply have eased significantly. The crashing prices of Middle East’s key benchmark crudes in the wake of the U.S.-Iran deal have opened arbitrage for shipping oil from the Middle East to the United States and Europe.
Global benchmark Brent crude briefly fell below $72.48 a barrel, the price it was at the day before the U.S. and Israel launched attacks on Iran on February 28, before edging up to $72.63. Energy prices have been on a wild ride since Iran responded to the strikes by effectively closing the strait, a critical waterway for oil and gas shipments. The cost of crude has been moving sharply lower since the U.S. and Iran signed a Memorandum of Understanding (MOU) on June 17, which set out a 60-day period for negotiations on Tehran's nuclear program and other measures to end the war.
Representatives from the two sides met in Switzerland last weekend for talks to end the war, which resulted in the U.S. partially lifting sanctions on Iranian oil exports. The ships passing through the waterway in recent days include those carrying crude oil, liquefied natural gas (LNG), fertiliser and other goods. The U.S. and Iran had also formed a 'communication line' to prevent misunderstandings 'with the aim of safe passage for commercial vessels through the Strait of Hormuz,' mediators Qatar and Pakistan said in a joint statement on Monday.
There has been a 'tremendous shift' with far more ships using the strait in recent days, said Dimitris Maniatis, the chief executive of Marisks, a maritime risk advisory firm working with ships stuck in the region. His company estimates around 80 ships have crossed the Strait of Hormuz since Monday after the first round of peace talks between the U.S. and Iran in Switzerland. A limited number of ships can cross a northern passageway with the permission of Iranian authorities. The U.S. navy has also provided guidance for vessels to travel through a southern route that is safe from mines and other obstacles that have been laid out since the war, Maniatis said.
But the number of ships crossing the strait is still below levels seen before the war, when it was used by more than 100 ships a day. Hundreds of ships still appear to be waiting in the Gulf. Fuel prices at the pump rose sharply when the Iran war began, and now the focus is on how quickly they will fall. The average price of regular gasoline in the U.S. has dropped to around $3.93 a gallon after reaching $4 a gallon in April, its highest since 2022, but is still well above pre-war levels.
'Oil prices have come down so much and we are not seeing anything at the pump by comparison the way they should be,' Donald Trump told reporters in the Oval Office. The American Petroleum Institute, which represents the oil and gas industry in the US, said fuel prices 'don't move in lockstep with crude oil.' British energy firms have faced similar accusations of unfairly hiking petrol prices since the Iran war.