Crude oil prices erase all Iran war gains as Hormuz traffic picks up, talks progress

Oil prices extended their declines and are close to erasing their wartime price gains on signs of increasing supply and Iran peace deal progress.

Brent declined towards $73 a barrel after declining 4% in the prior session. Meanwhile, West Texas Intermediate was close to $70 a barrel.

Key parts of the market are suddenly awash with supply, with buyers inundated by offers from the Middle East and regions such as Africa.

The US and Iran have both signaled progress after initial discussions to end the war, although claims from the two sides have diverged at times and additional talks on topics such as nuclear issues and a ceasefire in Lebanon face hurdles. Early optimism on a lasting agreement has led to an uptick in tankers openly crossing the Strait of Hormuz with their satellite signals switched on.

The rising availability of oil has driven the price of physical barrels lower from Angola to the United Arab Emirates. Brent’s prompt spread — a widely watched metric by the market — flipped into a bearish contango structure on Wednesday for the first time since the war started.

On a closing basis, WTI is around $3 from its pre-war price of $67.02 a barrel after rallying to a conflict peak of just above $119 in early March. Other prices have also come off, including Dated Brent, the most important physical oil benchmark, which topped $140 to reach a record high.

A temporary waiver from the US to allow for the purchases of Iranian oil that’s already been loaded is also set to add even more supply. Still, financing and insurance-related hurdles remain, which are likely to limit sales.

Much of the success in solving the oil supply problem after the war erupted has come at the expense of inventories that will need to be refilled, including in the US. Stockpiles at Cushing, Oklahoma, fell to around 19 million barrels last week, which is below a level that’s considered the operational requirement.

With inputs from Bloomberg