Brent crude oil prices fell by 4 per cent on Wednesday to trade at less than $74 per barrel for the first time since the Iran war began as more ships pass through the Strait of Hormuz, the vital waterway for global crude supplies.
Brent, the benchmark for two thirds of the world's oil, was down by 4.03 per cent to $73.97 a barrel at 7.56pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was trading 3.89 per cent lower at $70.36 a barrel, after briefly being in the $69 level.
“A 60-day period of a memorandum of understanding signed by the US and Iran on June 17 has offered the oil market hope that the supply crisis triggered by the closure of the Strait of Hormuz is ending,” said Sasha Foss, energy analyst at CSC Commodities, a division of Marex.
US and Iran held talks in the Swiss resort of Burgenstock at the weekend, with mediators Qatar and Pakistan unveiling a roadmap towards a final agreement.
US Vice President JD Vance reported that "good progress" had been made in an opening round of negotiations for a durable peace and a full reopening of Strait of Hormuz. More than 20 per cent of the global supply of crude and liquefied natural gas normally transits through the waterway.
Among the outcomes of the Swiss talks was an agreement to establish a direct communications line between the parties to prevent incidents in the strait.
Shipping traffic in the Strait of Hormuz increased following the talks, with 31 verified crossings involving a broad range of vessels, including crude, chemicals, container, bulk and general cargo carriers on Tuesday, Kpler data shows.
West-to-east movements accounted for 20 of the 31 transits, while three sanctioned vessels were observed moving east to west.
“Ship traffic through the Strait of Hormuz continues to increase as the US Treasury Department granted a temporary waiver on Iranian crude export sanctions from June 22," Mr Foss said. "This even includes US imports of Iranian crude, [which are] unlikely but a symbolic end to over 40 years of sanctions, and allowance of US dollar-denominated transactions.”
Iranian crude shipments had collapsed to 329,000 barrels per day in May, down 78 per cent from April and 85 per cent below February's 2.2 million bpd, as the US naval blockade in the strait choked loadings, according to Kpler. May was the weakest month for exports since the peak of the US maximum-pressure policy in 2020.
Tehran’s exports are expected to surge with the latest reprieve from the US Treasury, which could put further downward pressure on oil prices.
Oman on Wednesday also announced the setting up of a temporary shipping transit corridor in the Strait of Hormuz in co-ordination with the UN’s International Maritime Organisation, without imposing any fees.
The UAE, the world’s seventh-largest oil producer, is boosting supply in global markets. Oil exports in early June recovered to nearly 85 per cent of prewar levels, the International Energy Agency said.
