The benchmark global oil price declined more than $US3 on Wednesday to settle at its lowest level since before the start of the Iran war as supply concerns eased with more stranded oil tankers exiting the Strait of Hormuz.
Brent touched a low of $73.12, its weakest since February 27, the day before US-Israel strikes on Iran, while US crude futures slipped below $70 a barrel for the first time since March 2.
According to Bloomberg ship tracking data, seven oil tankers were either in the strait or had already crossed it on Tuesday.
Overnight, US Energy Secretary Chris Wright said crude oil flows were now similar to what they were before the start of the war.
But that seems a bit of a stretch, given that more than 135 vessels transited the key waterway in February on a daily basis.
“The oil market is also continuing to rely on inventories to plug the gap from supply shortages,” ANZ’s commodities analyst Daniel Hynes wrote in a morning note.
“US commercial crude oil inventories fell by 6,088kbbls last week. Combined with a drawdown of the US Strategic Petroleum Reserve by 9,060kbbls, total inventories are now at their lowest level since 1984.
“Levels are so low at Cushing, the main storage hub in the US, that traders are concerned that some companies will be forced to take tanks out of service due to risks of collapse.”
Reuters noted physical crude oil cargoes were selling at discounts across the globe, changing trade flows as markets come under pressure from fast-rising Middle Eastern supply with Iran set to boost sales following a temporary reprieve from US sanctions.
Prices for Brent crude for second-month delivery were also trading higher than prices for prompt delivery for the first time since the war, a sign of increased near-term supply.
“Positive signals from the Persian Gulf are fuelling optimism about oil flows through the Strait of Hormuz,” ING analysts wrote in a note.
“Vessel crossings increased in recent days, although they remain well below pre-war levels.”
The US also authorized Iranian oil sales this week, easing decades-old sanctions as it pushes toward a final peace deal with Tehran in return for commitments on nuclear inspections and free transit through the Strait of Hormuz.