Oil Prices Return to Pre-War Levels as Middle East Supply Concerns Ease

Darwin, 26 June :  Global oil prices fell to their lowest levels since before the Iran conflict, as expectations of increased crude supplies from the Middle East outweighed concerns over demand.

Brent crude futures for August delivery fell $1.06, or 1.44%, to $72.68 a barrel by 0639 GMT on Thursday. U.S. West Texas Intermediate (WTI) crude declined 76 cents, or 1.08%, to $69.58 a barrel.

The prices marked the lowest levels for both benchmark contracts since Feb. 27, reflecting growing confidence that oil supplies from the region will continue to recover.

Market data showed that August Brent crude was trading below the September contract, a sign that traders expect ample short-term supplies. The decline followed a sharp sell-off on Wednesday, when Brent crude dropped more than $3 a barrel and WTI fell by nearly the same amount as concerns over supply disruptions eased.

U.S. Energy Secretary Chris Wright said at a forum that oil flows through the Strait of Hormuz had nearly returned to levels seen before the outbreak of the Iran conflict. More than 20 million barrels of crude passed through the strategic waterway over the past 24 hours, he said.

However, Wright noted that several weeks may still be required to fully restore normal operations, as efforts continue to clear the area of potential maritime hazards.

In addition to improving Middle East supplies, Iran is preparing to increase oil exports after receiving temporary relief from certain U.S. sanctions, contributing to lower global crude shipping costs.

Last week, a preliminary agreement aimed at ending the conflict involving Iran, the United States and Israel helped pave the way for the resumption of commercial shipping through the Strait of Hormuz. The agreement established a 60-day negotiation period to address complex issues, including Iran’s nuclear programme.

Wright said that even if the agreement ultimately collapses, oil shipments through the Strait of Hormuz are expected to continue and Iran would not be able to shut down the route again.

Meanwhile, Tehran has indicated that it is considering imposing a maritime service fee on vessels transiting the strait. The United States has opposed the proposal, arguing that the waterway is an international shipping route and should remain free of such charges.

To facilitate the safe movement of oil tankers, Oman on Wednesday opened several temporary alternative routes around the Strait of Hormuz. The International Maritime Organization (IMO) and Omani authorities are coordinating vessel traffic through the area.

Iran’s Revolutionary Guards (IRGC), however, issued a warning on Thursday against unauthorized transit through the strait. Criticising the newly opened alternative routes, the force said vessels that fail to comply with its directives could face action.