Crude Extends Losses as Middle East Supply Concerns Ease

Oil prices extended their decline on Thursday and moved close to levels recorded before the US-Israel war involving Iran.

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Investors focused on improving supply expectations from the Middle East. As a result, concerns over demand played a smaller role in market direction.

Brent crude for August delivery fell by $1.22, or 1.65 percent, to $72.52 per barrel.

Meanwhile, US West Texas Intermediate dropped by $1.02, or 1.45 percent, to $69.32 per barrel.

Both benchmark contracts reached their lowest levels since February 27.

At the same time, August Brent traded below September contracts. This market structure suggested strong short-term supply conditions.

Tony Sycamore, an analyst at IG, said the speed of the decline surprised many investors.

He said markets now expect Middle Eastern oil supply to return much faster than anticipated only weeks earlier.

Brent had already lost more than $3 on Wednesday. Likewise, WTI also finished nearly $3 lower.

Meanwhile, US Energy Secretary Chris Wright said oil flows through the Strait of Hormuz had almost returned to pre-conflict levels.

He told a forum that at least 20 million barrels moved through the route during the previous 24 hours.

However, he added that full normalisation may still take several weeks because authorities must complete demining operations.

Rising supply from the Middle East also pressured prices.

In addition, Iran is expected to increase oil sales following temporary relief from US sanctions.

As a result, prices for physical crude cargoes declined across global markets.

Last week, an initial agreement helped end fighting between the United States, Israel and Iran.

That agreement reopened shipping traffic through the Strait of Hormuz and created a 60-day period for negotiations.

The talks aim to address more difficult issues, including Iran’s nuclear programme.

Meanwhile, Wright said oil would continue moving through the strait even if negotiations failed.

He also argued that Iran would not be able to shut the route again.

Elsewhere, Oman introduced temporary shipping routes to support tanker departures.

International maritime authorities and Omani officials coordinated vessel movements.

Qatar’s prime minister also visited Oman to discuss future management arrangements for the strait with Iran, Iraq and Gulf states.

Macquarie analysts expect oil markets to return quickly to pre-war conditions as supply chains adjust.

They forecast Brent prices will average $67 per barrel during the third quarter. They expect WTI to average $62.

Although US crude inventories fell to their lowest level since 1984 last week, markets paid limited attention.

Instead, traders continued to focus on developments surrounding the Strait of Hormuz.