Global oil benchmarks continued their downward trajectory on Thursday, completely erasing the geopolitical risk premiums built up during the recent conflict in the Middle East. Brent crude futures slipped more than 1% to slide just under $71 per barrel, marking their lowest level since late February, while U.S. West Texas Intermediate crude fell toward $67 per barrel.
- Brent crude fell to around $70.80 per barrel, hitting its lowest price point since the week before the outbreak of regional hostilities on February 28.
- Total daily flows through the Strait of Hormuz topped 10 million barrels as shipping conditions rapidly improved following a 60-day ceasefire and indirect U.S.-Iran negotiations.
- Supply expanded significantly due to a combined influx of restored regional exports, ad hoc sales, and record-high shipping activity from major global producers.
The swift decline is primarily driven by a rapid unwinding of supply disruption anxieties. Tanker traffic through the critical Strait of Hormuz, a conduit that typically handles roughly one-fifth of the world’s petroleum exports during peacetime, has demonstrated a structural recovery. Data indicates that regional exporters like the United Arab Emirates have fully restored outbound shipments back to their pre-conflict levels of over 3.9 million barrels a day, while Saudi Arabia has ramped up operations at its massive Ras Tanura terminal to roughly 90% capacity.
Macro traders are heavily shifting their focus away from war-related risk premiums and back to broader market fundamentals. Despite recent U.S. domestic stockpile drawdowns, the physical crude market is entering a bearish contango price structure, indicating a short-term oversupply. This physical overhang is further compounded by uninspiring economic data and lower-than-anticipated demand from major global buyers like China, paving the way for substantial downward revisions in institutional price targets for the remainder of the year.
While the immediate influx of pent-up supply has provided relief to energy markets, some analysts urge caution regarding long-term structural balances. “Several key issues in the MoU remain unresolved, but the two sides appear to have backed off confrontation on the issue of the interim Hormuz transit regime, at least for the time being,” noted Vandana Hari, founder of energy market analysis provider Vanda Insights. “I expect crude to continue grinding lower until the backlog of stranded barrels has cleared.” Market participants are now closely monitoring upcoming diplomatic discussions in Qatar alongside the next policy shifts from OPEC+ to gauge where a true physical floor will establish.
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Disclaimer: This article is for informational purposes only and does not constitute advice of any kind. Readers should conduct their own research before making any decisions.
