Oil prices have dropped to pre-war levels
Oil prices continue to decline and have approached levels last seen before the start of the war with Iran, as expectations of increased supplies from the Middle East outweighed demand concerns, Reuters reports.
Brent crude oil futures fell by $1.06, or 1.44%, to $72.68 per barrel, while U.S. West Texas Intermediate (WTI) crude lost 76 cents, or 1.08%, dropping to $69.58 per barrel. Both contracts reached their lowest levels since February 27. August Brent futures traded cheaper than September contracts, which were priced at $73.59 per barrel, indicating sufficient short-term supply.
"The speed of this decline caught many by surprise, as markets are pricing in a much faster return of Middle Eastern oil than most expected just two weeks ago," noted IG analyst Tony Sycamore in his briefing.
On Wednesday, Brent dropped more than $3 due to easing supply concerns, while WTI ended trading down nearly $3.
U.S. Energy Secretary Chris Wright stated at a forum that shipment volumes through the Strait of Hormuz have nearly returned to pre-war levels with Iran: at least 20 million barrels of oil passed through the strait in the last 24 hours alone. However, he added that full restoration of normal navigation will take several more weeks as the strait needs to be cleared of mines.
The increase in supplies from the Middle East, along with Iran preparing to ramp up sales following a temporary easing of U.S. sanctions, has led to a decline in prices for physical crude oil shipments worldwide.
Macquarie analysts expect oil prices to quickly return to pre-war levels as supply chains adapt and the Strait of Hormuz fully reopens for navigation.
They forecast that in the third quarter, the average Brent price will be $67 per barrel, and WTI $62 per barrel, compared to second quarter averages of $94 and $87 respectively.
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