Oil prices have fallen below levels seen before the Iran war started in late February as more oil tankers exited the strait of Hormuz.
Brent crude, the global benchmark, fell to a low of $72.24 a barrel on Thursday, slightly lower than the day before the US and Israel launched missile attacks on Tehran on 28 February. Prices have fallen more than 20% this month.
Brent crude for August delivery was trading lower than that for September, which was priced at $73.59, signalling ample short-term supply.
Vessel traffic in the strait, a vital shipping passage, doubled over the previous 24 hours to its highest level since late February, according to CNN and MarineTraffic data.
Ipek Ozkardeskaya, senior analyst at Swissquote, said news that vessels are now transiting the strait of Hormuz with their satellite signals switched on had helped push down the oil price.
She added: “A combination of strategic inventory releases, a collapse in demand from top buyer China and a substantial number of tankers quietly leaving the Persian Gulf “dark” had contributed to a small oversupply in some important markets.”
Susannah Streeter, chief investment strategist at the Wealth Club, said: “Fears of a long-lasting global energy crunch induced by the Iran conflict are slinking away, with oil prices sinking back towards pre-crisis levels. Instead of relief coursing through European markets, there’s still a big dose of caution as the knock-on effects of the record-breaking heatwave collide with concerns about weak growth across the region.”
A Liberian oil tanker made its way out of the strait on Thursday using a new route close to Oman’s shore that has been promoted by a UN maritime agency, despite threats from Iran’s paramilitary Revolutionary Guards.
Tensions are rising again between Iran and the US over the terms of their interim accord. In a memorandum of understanding signed last week, both sides agreed to a 60-day period while they try to negotiate a permanent peace deal.
A big threat to the deal is Lebanon. Israel launched an airstrike that killed two people in southern Lebanon on Wednesday, the country’s state-run news agency said. It was Israel’s first airstrike in the country since the latest ceasefire took effect on Saturday.
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Streeter said: “There’s still a long way to go to clear the backlog and fully meet demand, but with oil-producing nations turning on the taps and repairs to infrastructure ongoing, oil prices are on the decline. Energy-efficiency measures adopted during the crisis, coupled with fears of slowing global growth, are contributing to the bearish outlook for the sector.
“However, one energy shock is replacing another as far as Europe is concerned as it languishes under a punishing heatwave. Peak evening wholesale electricity prices have reached multi-year highs in several European markets this week. Offices and public buildings are cranking up cooling systems, while portable air conditioners and fans are being switched on as people try to cope with the record-breaking heat.”
Ozkardeskaya predicted that oil prices will probably swing between $60 and $80 a barrel in the coming weeks.
“Geopolitical risks remain, as the Middle East is rarely a calm sea, China will start tapping into the oil market as tensions ease, and countries will begin replenishing their strategic reserves, absorbing part of the additional supply.”