Key facts
- Oil prices rose as uncertainty grew over a U.S.-Iran truce following canceled peace talks and increased Israeli attacks on Lebanon.
- The Strait of Hormuz reopened after a preliminary U.S.-Iran deal, leading to tankers carrying millions of barrels of crude sailing through.
- Major financial institutions have lowered their oil price forecasts, with Goldman Sachs predicting only 70% traffic recovery.
- Despite the reopening, China and India's top refiners face challenges booking tankers due to high rates and safety concerns.
- Kuwait and Iraq are preparing to resume oil production and exports.
Oil prices rose as uncertainty surrounding a U.S.-Iran truce intensified after peace talks in Switzerland were canceled and Israel increased attacks on Lebanon. This marks a reversal from earlier declines, which were driven by hopes of the Strait of Hormuz reopening following a preliminary deal between the U.S. and Iran.
Brent crude futures gained 0.64% to $80.36 a barrel, and U.S. West Texas Intermediate (WTI) crude rose 1.7% to $77.88 a barrel, though both contracts were headed for an approximate 8% weekly loss. The more actively traded WTI August contract was up 59 cents at $76.44 a barrel.
Analysts suggest that prices may have bottomed out and could see renewed volatility as cracks emerge in the memorandum of understanding between the U.S. and Iran. The cancellation of talks and continued conflict in Lebanon cast doubt on the resumption of normal transit through the Strait of Hormuz, a critical chokepoint for global oil supply.
Previously, several tankers, including three Saudi-flagged vessels carrying 6 million barrels of crude, had sailed through the strait after the U.S. and Iran signed an interim deal. This deal is expected to release over 85 million barrels of oil into global markets and potentially lift U.S. sanctions on Iranian oil, further increasing supply. However, traders are awaiting concrete evidence of normalized traffic before committing to further price declines.
Middle East producers are preparing to resume exports, with Kuwait Petroleum Corp lifting all force majeure notices and Iraq's oil minister stating that oilfields are ready to resume production. Despite these preparations, challenges remain, as China and India's top refiners are struggling to book tankers due to high rates and safety concerns.