Crude oil prices continued to grind lower on Friday, June 26, as shipping transits through the Strait of Hormuz accelerated, easing supply concerns that had intensified amid the blockade.
The international benchmark, Brent crude, crashed another $3.6, or 4.8%, to $72 a barrel, marking its lowest level since February 27. For the week, Brent has fallen 10%. Friday’s decline has widened June’s losses to 20%, putting it on track for its biggest monthly drop since March 2020, when prices plunged 47%.
Meanwhile, US crude futures tumbled $3 or 4.7% a barrel to $68.57, their lowest level in four months.
Ships have resumed openly transiting the Strait of Hormuz following early progress towards a lasting agreement to end the US-Iran war, adding millions of barrels to the global market. Persian Gulf exports have now recovered to about 75% of pre-war levels, according to Bloomberg calculations.
As traffic through the Strait of Hormuz has picked up, key Middle Eastern oil producers, including the United Arab Emirates, Kuwait, and Qatar, have stepped up supply despite facing difficulties in securing enough tankers to transport the additional crude.
Crucially, Saudi Arabia has reportedly begun loading tankers again at its key Ras Tanura terminal in the Persian Gulf, signalling a continued ramp-up in regional oil exports. Fears of renewed hostilities also eased after the United Arab Emirates quickly asked the public to disregard a missile threat alert issued on Friday morning.
These bearish developments erased Thursday’s rally, during which oil prices climbed more than 2% after the container ship Ever Lovely was struck by an unidentified projectile while sailing southeast of Oman, Bloomberg reported.
Peace efforts, Iranian exports accelerate oil price decline
The decline in crude oil prices began after the United States signed an interim agreement with Iran, which eased restrictions on Iranian ports and allowed the country to resume oil exports. The deal also removed restrictions on the Strait of Hormuz, which both the US and Iran had sought to control during the conflict.
In a significant development, Washington also reportedly granted Iran a 60-day licence to sell oil in international markets, further boosting global crude supplies.
Late Thursday, US President Donald Trump said the Strait of Hormuz was open. Speaking at the White House, he also claimed that Iran would buy US agricultural products using money from unfrozen assets, a claim that Tehran later disputed.
The decline in oil prices has eased inflation concerns and boosted confidence that the economic impact of the Middle East conflict may be more limited than initially feared.
Brent, WTI erase nearly half of war-driven gains
As supply disruptions continue to ease, Brent crude has now fallen 40% from its four-month high of $119.50 a barrel, reached shortly after the conflict erupted in the Middle East. The WTI crude is now down by 42.60% from its recent peak.
Last week, the International Energy Agency (IEA) warned of a potential supply glut, projecting global oil supply to increase by 8 million barrels per day by 2027, while demand growth is projected at just 2 million barrels per day.
In March, the IEA announced that it would make 400 million barrels of oil from its emergency reserves available to the market during the peak of the Middle East conflict.
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