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US Oil Update: Futures Drop as Markets Weigh Resumption of Flows via Hormuz

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Crude oil futures fell in midday trading on Tuesday as markets assessed crude flows through the Strait of Hormuz after the US issued a temporary license authorizing the sale of Iranian crude and petroleum products, easing supply concerns.

Front-month West Texas Intermediate crude futures dropped by 1.1% to $73.02 per barrel, while Brent futures were down 1.3% to $76.92/bbl.

The supply shock after the Hormuz closure has been more than twice the peak shortfall seen during the 1973 oil crisis, Federal Reserve Bank of Dallas strategists said, noting that the US economy has become less vulnerable to such disruptions.

The analysts said the US has reduced its dependence on oil and changed from a major net oil importer to a net oil exporter.

On Tuesday, President Trump said in a social media post that 19 million barrels of oil flowed out of the Strait on Monday, while pointing to falling oil prices.

Soojin Kim, a research analyst at MUFG, said oil prices are likely to remain under pressure as supply recovers and risk premiums continue to unwind.

Fueling bullish sentiment, the latest data show that more commercial vessels are transiting the strategic waterway with their satellite signals switched on. According to Marine Traffic and Kpler data posted on X, confirmed transits rose from 32 vessels between June 12-14 to 93 between June 19-21.

Meanwhile, Iran and Oman are working to reach an agreement on the future administration of the Strait, including the cost of managing transit.

The two countries, bordering the Hormuz, agreed to establish a joint working group between their foreign ministries to continue discussions on the future framework governing navigation via the Hormuz.

Pressuring crude prices, the US on Monday authorized the sale of Iranian oil and fuels as part of an agreement to end the Middle East conflict.

The US Treasury Department's Office of Foreign Assets Control issued a 60-day license that allows Iran to sell its energy products through Aug. 21 and make payments in US dollars. The waiver also allows for the importation of Iranian crude oil and other petrochemical and petroleum products into the US.

Saxo Bank strategists said the temporary license is expected to facilitate the export of some of the estimated 30 million barrels that left Iranian ports last week.

Marine Traffic said in a post on X that the recovery in shipping flow was supported by recent diplomatic developments and the temporary general license, which has helped ease immediate compliance uncertainty around approved Hormuz transits until Aug. 21.

Going forward, Dan Bunkering strategists expect the oil market to face a shortage of barrels for the time being, although talks are progressing. The analysts view the current price level as "fair" and do not expect a return to the pre-conflict range of $60-70/bbl seen earlier this year.

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US Oil Update: Futures Drop After US Authorizes Iranian Crude Sales

Crude oil futures fell in after-hours trading on Monday after the US issued a temporary license authorizing the sale of Iranian crude and petroleum products, easing supply concerns and signaling significant progress in negotiations to end the conflict in the Middle East.Front-month West Texas Intermediate crude futures dropped by 1.8% to $75.15 per barrel, while Brent futures were down 3.2% to $78.28/bbl.Soojin Kim, a research analyst at MUFG, said the prospect of strong supply, combined with softer Chinese demand, has weighed on prices and reduced the war-related risk premium.The US Treasury Department's Office of Foreign Assets Control issued "General License X" on Monday, granting a 60-day waiver that permits the production, delivery, and sale of Iranian-origin crude, petroleum products, and petrochemicals through Aug. 21.The waiver also allows for the importation of Iranian crude oil and other petrochemical and petroleum products into the US."In line with the ongoing productive talks in Switzerland, Iran has committed to free and open transit in the Strait of Hormuz and to permit International Atomic Energy Agency (IAEA) inspectors into their country," US Treasury Secretary Scott Bessent said in a post on X.TankerTrackers said Iran has exported 36 million barrels of crude oil since June 15, and about an equal amount remains afloat in Iran.Meanwhile, the US and Iran on Monday made progress during peace talks aimed at reaching a final deal within 60 days, including an agreement to end hostilities in Lebanon.Vice President J D Vance said that talks between the US and Iran have made "great progress."Earlier on Monday, Iranian Foreign Minister Abbas Araghchi said the mediators, Qatar and Pakistan, had managed to ease some of the tensions over Lebanon."Tireless Pakistani and Qatari mediation has delivered major progress to end Lebanon War," Araghchi said in a social media post on X. "Oil and petrochem exports are waived, blockade lifted, some frozen assets released, and major reconstruction & development plan launched for Iran."On the supply front, the latest shipping data show an uptick in oil and liquefied natural gas tanker traffic through the Strait of Hormuz over the 19-21 June period, though overall flows remain below pre-conflict levels.Kpler said a total of 71 confirmed vessel transits via the strategic waterway, with activity peaking at 35 crossings on Saturday.However, tanker traffic via the Strait remains about 15% below pre-conflict levels, EBW Analytics said, adding that alternative supply routes and weakening Asian demand are helping loosen balances.

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Middle East Supply Losses Top 1.2 Billion Barrels as Recovery Takes Shape, Kpler Says

Middle Eastern oil supply could return faster than expected as tanker movements improve and producers prepare to restore output, Kpler said in a Monday note.Recent Israeli strikes have delayed the formal signing of a memorandum of understanding between the US and Iran, while renewed attacks in southern Lebanon added fresh uncertainty to negotiations, according to Kpler.Switzerland's Foreign Ministry said US-Iran talks had been postponed. At the same time, reports indicated the US lifted its naval blockade on Iranian shipping, creating conditions for a gradual recovery in exports.Cargo-tracking data showed more Iranian-linked tankers transiting the Strait of Hormuz with AIS active. A few very large crude carriers reappeared on tracking systems after extended periods of limited visibility.Kpler estimates that over 10 million barrels per day of Middle Eastern crude and condensate production remained offline as of June 19, resulting in cumulative losses exceeding 1.2 billion barrels.Kuwait may restore production faster than expected after Kuwait Petroleum said it aims to increase output by 2 million b/d within one week.Kpler estimates Kuwaiti production could rise from about 950,000 b/d in June to 2 million b/d in July and nearly 2.4 million b/d in August, compared with pre-war output of 2.74 million b/d.Kpler said limited storage, with inventories near 50% capacity, and the availability of tanker vessels could support a quicker recovery in Kuwaiti exports, although prolonged restrictions in the Strait of Hormuz could slow the pace.Iran could also recover output rapidly if export restrictions continue to ease. Kpler estimates that Iranian crude production fell by as much as 1.3 million b/d during the blockade, largely because exports stopped rather than because oil fields were damaged.The firm expects Iran's crude production to reach 3.4 million b/d by August, exceeding pre-conflict levels of 3.2 million b/d to 3.3 million b/d. Kpler said Iran's export system can recover more quickly than many neighboring producers once shipping routes normalize.Saudi Arabia and the UAE could return to pre-conflict production levels within several weeks to two months. Saudi inventories remain about 55% full, while UAE inventories stand near 44%, allowing both countries to support exports while tanker traffic recovers.Kpler expects Middle Eastern crude and condensate outages to fall to roughly 1.2 million b/d by the end of August. The firm forecasts Saudi Arabia and the UAE will return to pre-war production levels by August, while Iraq and Kuwait should recover by November.

Oil & Energy

LNG Trade Remains Resilient as Hormuz Traffic Gradually Recovers, Vortexa Says

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