NEW YORK (Realist English). Global oil prices continued their decline for a second consecutive day amid expectations of the reopening of the Strait of Hormuz following the signing of a peace agreement between the United States and Iran.
Brent crude fell below $80 per barrel for the first time since March, WTI traded around $76, while Russian Urals lost more than 8% in a single day.
What is happening with prices
Over two days, benchmark oil grades lost about 10% of their value. On June 15, Brent and WTI plunged nearly 5% following US President Donald Trump’s announcement of a preliminary peace agreement with Iran.
On Tuesday, June 16, the decline continued. Brent fell to $80.89 per barrel, WTI to $78.27. Russian Urals dropped 8.43% to $66.27 per barrel.
By Tuesday evening, Brent closed at $78.96 (-5.1%), while WTI finished at $76.05 (-5.8%).
On Wednesday, June 17, prices corrected slightly upward: Brent rose 0.6% to $79.40, WTI to $76.52.
Thus, over the week, benchmark oil prices have fallen by approximately 9%, though they remain significantly above pre-crisis levels, The Wall Street Journal notes. Before the conflict began on February 28, Brent closed at $72.48, WTI at $67.02.
Main reason: unblocking the Strait of Hormuz
The key driver of the decline is the expectation of an imminent reopening of the Strait of Hormuz, through which about 20% of global oil supplies passed before the war. The official signing ceremony of the memorandum of understanding between the US and Iran is scheduled for June 19 in Switzerland.
The agreement provides for the lifting of the blockade of Iranian ports, and Tehran undertakes to restore shipping through the strait. Iran will be able to sell its oil immediately after the document is signed.
At the same time, the most complex issues – regarding Iran’s nuclear program and the long-term status of the strait – have been deferred to a 60-day negotiation period.
Analysts: decline will continue, but not indefinitely
Investment banks, including Goldman Sachs, Morgan Stanley and Citi, have lowered their oil price forecasts. Goldman Sachs cut its Brent price forecast for the fourth quarter to $80 from $90 per barrel.
Rystad Energy believes prices will retain a residual geopolitical premium of $5–10 per barrel. Morgan Stanley analysts expect it will take several weeks for tanker flows through the Strait to recover.
Saxo Bank expert Ole Hansen warned: “Near-term risks are skewed to the downside as the market prices in a rapid reopening of the strait. However, depleted inventories, seasonal demand and lingering geopolitical uncertainty could make a return to pre-crisis prices less straightforward than current optimism suggests.”
Gas in Europe: below $500
The European gas market reacted more modestly. On June 16, July futures for gas under the TTF index opened at $512.2 per thousand cubic metres (+1.1%), but by evening had fallen below $500 for the first time since late April. The decline for the day was about 1%.
China, rates and Ukraine
Additional pressure on the oil market comes from weak physical demand. China’s crude oil imports fell to their lowest level in eight years in May. Oil refining in China fell 9.1% year-on-year.
Traders are also assessing Trump’s statements about the need for peace between Russia and Ukraine – a settlement could lead to the lifting of some sanctions and an increase in Russian oil exports.
On June 16, the Bank of Japan raised its key interest rate to a 31-year high, which could also weigh on global demand. In the US, the market awaits inventory data from the API and the Energy Department.
