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Oil Falls Again on Rising Supply as Tankers Continue to Leave the Persian Gulf

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Oil traded at a fresh four-month low early on Thursday, returning to pre-war levels as tankers continue to leave the Persian Gulf following the reopening of the Strait of Hormuz.

West Texas Intermediate crude oil for August delivery was last seen down 0.7% to US$69.54 per barrel, the lowest since Feb. 27, the day before the U.S. and Israel launched their war on Iran, while August Brent oil was down 0.8% to US$73.13.

U.S. Energy Secretary Chris Wright on Wednesday told a conference that ships carrying 20-million barrels of oil had transited the Strait since the two countries declared a 60-day ceasefire last week, raising supply form Gulf producers, including Iran, which has been freed from the U.S. sanctions.

The return of Gulf supply is expected to normalize markets after the war produced the largest-ever oil supply shock and depleted global inventories, returning the focus to waning demand amid the energy transition.

"The reopening of the Strait of Hormuz has created a short-term wave of supply, pushing prices back toward levels that may prove difficult to sustain once the backlog of stranded barrels has cleared and releases from strategic reserves are scaled back. Longer term, however, slower demand growth driven by electrification and fuel switching may continue to cap upside potential," Saxo Bank noted.

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