Oil is on track for its biggest quarterly drop since the coronavirus pandemic, as flows through the Strait of Hormuz accelerate following progress on a peace deal, while Morgan Stanley warned of a potential glut.
The price of Brent crude futures for September settlement, the most traded contract, surpassed $73 a barrel, while the nearest-month futures contract fell by about a third this quarter, the biggest decline since 2020. West Texas Intermediate crude was near $70.
The US bank cut its price forecast for Brent crude by a sixth for the next quarter, warning that flows through the waterway only need to recover to about 65% of pre-conflict levels for a glut to form.
Conflicting signals have emerged from Washington and Tehran regarding the next phase of negotiations to end the four-month-long war. The United States says talks are scheduled to begin Tuesday in Doha. Meanwhile, the Iranian Foreign Ministry stated via Telegram that it will send a delegation of experts but ruled out direct negotiations.
Hormuz returns to the forefront of oil markets
Iranian Deputy Foreign Minister Kazem Gharibabadi said Tehran will continue its plans to oversee traffic through the Strait of Hormuz. In remarks to state television, he added that his country wants to reach an agreement with Oman to regulate the waterway, but will proceed with its own plans if necessary.
In addition, Morgan Stanley noted that it counted 35 oil and gas tankers leaving the Arabian Gulf waters via the Strait of Hormuz on Thursday, the first time the level has returned to the range of 30 to 40 tankers that was typical before the conflict began in February.
Although traffic at the bottleneck slowed over the weekend following a new escalation in the conflict and Iranian attacks on ships, it has since picked up again.
“Markets tend to move based on short-term psychological,” said Eric van Nostrand, chief investment officer at Lazard, in an interview with Bloomberg Television on Monday.
He added: The positive atmosphere surrounding traffic in the Strait of Hormuz, which appears much better than it was last week compared to previous weeks, has prompted many to take speculative investment positions in anticipation of cheaper oil.
In the latest trading, Brent crude futures for September settlement fell 0.9% to $73.24 a barrel at 7:15 a.m. in London, while the less actively traded August contract, which expires on Tuesday, dropped 1.3% to $72.22 a barrel. West Texas Intermediate crude futures for August delivery also declined, falling 1.1% to trade at $69.97 a barrel.
