Oil prices extend decline as Hormuz traffic recovers, ICIS says

By Romel S. Gurky

Global oil prices extended their decline as crude supply through the Strait of Hormuz continued to recover following progress in US-Iran peace talks, according to a market update by market intelligence firm ICIS.

Brent crude fell below US$77 per barrel, while US West Texas Intermediate also declined, with both benchmarks down about 0.6% in early Wednesday trading as the market priced in easing supply risks across the Middle East.

ICIS said improving tanker movements through the Strait of Hormuz, together with temporary US sanctions relief for Iran and recovering regional exports, have reduced concerns over supply disruptions.

"While key issues, including Iran's nuclear program, the Lebanon ceasefire, and the full reopening of Hormuz, remain unresolved, the market is increasingly pricing in a normalisation of regional energy flows," MUFG Research analyst Soojin Kim said in the report.

Kim added that oil prices are likely to remain under pressure as supply recovers and geopolitical risk premiums continue to unwind.

ICIS Head of Energy and Refining Ajay Parmar said approximately 1.2 million barrels per day of Venezuelan crude has returned to global markets following a series of US licenses permitting companies to expand energy projects in the country, helping offset shortages of heavy sour crude.

The report said confidence among shipowners has improved as more vessels resumed transits through the Strait of Hormuz. Seven tankers, including two fully laden non-Iranian supertankers, crossed the waterway with satellite tracking activated on June 23, while additional stranded vessels also resumed passage.

Iran's semi-official Fars news agency said a limited number of ships are being allowed to transit the strait daily under coordination with the country's Revolutionary Guards Navy.

The International Maritime Organization has begun implementing an evacuation plan for more than 11,000 seafarers stranded in the region following the US-Iran ceasefire agreement, while Oman has established a temporary maritime corridor to facilitate vessel movements.

Iran and Oman are also discussing a joint framework governing Hormuz transit, including potential passage fees.

Supply conditions have also improved elsewhere in the region. According to the report, the United Arab Emirates has restored most of its export capacity disrupted during the conflict, with shipments recovering to about 4.3 million barrels per day in early June, or nearly 85% of pre-conflict levels.

Kuwait has also begun normalizing exports, with Kuwait Petroleum Corp offering naphtha cargoes for loading from Persian Gulf ports that require transit through the Strait of Hormuz.

"The move, alongside the lifting of force majeure notices and plans to increase oil production, signals growing confidence in the gradual recovery of regional energy flows," Parmar said.

Separately, the report noted that Russia is considering restrictions on diesel exports following Ukrainian drone attacks on its refineries, while UOB Global Economics & Markets Research warned that fuel shortages and rising gasoline prices are spreading across much of the country.

Editing by Alexander Ginting