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