Oil Fluctuates Within a Narrow Range as Flows through the Strait of Hormuz Recover

SadaNews - Oil has fluctuated within a narrow range, as flows continue through the Strait of Hormuz, and "OPEC+" signals an increase in supplies.

Brent crude traded below $72 a barrel, while West Texas Intermediate crude was around $69. Oil and gas shipments through the U.S.-protected corridor showed signs of recovery on Sunday, a day after several vessels made sudden turns and changes in routes in this vital corridor.

Separately, "OPEC+" members supported another modest increase in quotas for next month, as 7 countries led by Saudi Arabia and Russia agreed to add 188,000 barrels per day, in an additional easing of restrictions imposed several years ago. Currently, those additional barrels remain theoretical, but the group's decision indicates a willingness to add production as conditions continue to normalize.

Hormuz Flows and Supply Recovery Pressure Oil

Brent crude collapsed 30% in the second quarter, following a temporary peace agreement between Washington and Tehran, paving the way for a rapid, albeit incomplete, resumption of traffic through the Strait of Hormuz.

Under these circumstances, Wall Street banks have predicted that prices have room for further declines during this half of the year, with Citigroup signaling a potential return to the $60 range by the end of the year.

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Analysts at RBC Capital Markets LLC, including Helima Croft, wrote in a note that "OPEC countries affected by the war are in a rebuilding phase regarding production and exports." They added, "However, we believe there is very limited appetite for a price collapse driven by supplies."

Major producers in the Gulf were ramping up production rapidly. Saudi exports had already jumped to levels close to pre-war levels, as the kingdom passed its tankers through Hormuz. The UAE, which had previously withdrawn from "OPEC", also resumed its flows.

Anticipation for Regional Crude Prices

Traders will be watching this week for the official selling prices from Saudi Arabia, the UAE, and other producers, as they attempt to bring more products back to the market. For July, Riyadh reduced the premium on its main crude to Asia to $9.50 a barrel, down from $15.50 in June.

In signs of increasing market flexibility in the near term, the time spreads for the benchmark crudes "Brent" and "Dubai" have flipped to a downward contango pattern, with near-dated contracts trading at a discount to longer-dated contracts. Many grades in the physical market are also cheaper than the main benchmark crudes.

Over the weekend, Iran began a mass funeral for leader Ali Khamenei in ceremonies in Tehran. Khamenei was killed in an American and Israeli strike on the first day of the U.S.-Israeli war on Iran in February.