Oil Steadies After Recent Slump With Hormuz Flows in Focus

Oil held onto its recent run of losses, with traders looking for clues on flows through the Strait of Hormuz as barrels continue to return to the market after months of disruption.

Brent traded near $72 a barrel. A slew of Japan-linked vessels were crossing Hormuz using a route close to Iran on Monday, according to vessel-tracking data compiled by Bloomberg, while traffic through a US-protected corridor showed signs of recovering Sunday. Earlier in the weekend, several vessels had performed unexplained U-turns and detours in the waterway.

With more barrels making their way out of Hormuz, attention is turning to how major Persian Gulf producers will price their barrels in the coming months, with the next round of official selling prices due this week. Last month’s trading of real-world barrels across the globe saw prices plunge as larger volumes of crude began flowing out of the world’s most important energy chokepoint.

OPEC+ members backed another modest rise in quotas for next month, with seven nations led by Saudi Arabia and Russia agreeing to add 188,000 barrels a day in a further roll-back of curbs made several years ago. At present, those extra barrels are theoretical, but the group’s decision signals a desire to add output as conditions continue to normalize.

Still, shipping through the strait remains risky and several sticking points persist between the US and Iran.

“We think there is minimal appetite for a supply-driven price washout,” RBC Capital Markets LLC analysts including Helima Croft said in a note. “Hormuz transits will remain well below prewar levels given the enduring security threats and Iran’s insistence on retaining operational control.”

Brent crude collapsed by 30% in the second quarter as Washington and Tehran agreed to an interim peace deal, clearing the way for a brisk — even if yet incomplete — resumption of traffic via Hormuz. Against that backdrop, Wall Street banks have forecast that prices have scope to slump further this half, with Citigroup Inc. flagging the possibility of a return to $60 by year-end.