Oil prices fell for a third consecutive session as Middle Eastern crude exports continued to recover towards pre-tension levels, easing concerns over near-term supply.
The improvement is becoming broader across the region. Kuwait has reported higher output, while Saudi Arabia exported more through Hormuz and continued efforts to return its pipeline’s capacity online.
The G7 release of emergency stocks adds another source of supply, although its impact on crude could be more limited if the focus is on diesel volumes.
However, geopolitical risk has not disappeared and effectively limits the extent of the decline. Shipping through the Strait of Hormuz still faces constraints, while rising tensions in the Red Sea fuel concerns.
The stalemate in US-Iran negotiations also leaves no clear path towards a full normalisation of regional traffic. The risk premium is falling very gradually, as concerns remain about a sudden reduction in supplies from the Middle East. Moreover, shortages remain a concern in the US, where the strategic reserve is at its lowest level since 1982.
Nevertheless, WTI crude has once again turned downwards since April after rising above the $100 mark. The zone of active intervention remains in place, leading to a fourth consecutive week of price declines. However, from March to June, prices could not be pushed any lower. Signs of substantial progress in the negotiations later fuelled a deeper decline, but the news of recent weeks does not allow for such hopes to be sustained.
Looking ahead, the bias remains tilted towards further downside as confidence in near-term supply improves. Upcoming data could reinforce that view if US inventories point to more increases. Conversely, a meaningful draw in stocks or a setback in negotiations could slow the decline.
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