Oil Prices Slide to Pre‑war Levels As Hormuz Traffic Resumes

Oil prices fell on Thursday to levels not seen since before the Iran war began, as rising crude flows from the Middle East eased fears of a sustained supply squeeze.

Reuters reports that benchmark Brent crude for August delivery was down 25 cents, or 0.34 per cent, at $73.49 a barrel by 13:27 GMT. U.S. West Texas Intermediate (WTI) lost 24 cents, or 0.34 per cent, to $70.10 a barrel.

Both contracts reached their lowest intraday levels since Feb. 27 — the day before U.S.-Israeli strikes on Iran started.

Market structure showed ample near-term supply. August Brent traded below the September contract, which was $73.83 at the same time, a pattern traders call “backwardation” and which signals stronger supply in the short run.

Analysts and officials said a combination of clearing vessel backlogs, restarts at terminals and an agreed pause in hostilities had reopened key shipping routes. “The backlog of vessels in the Persian Gulf is being cleared, which has created a wave of supply,” Rystad Energy analyst Janiv Shah told Reuters.

He added that some supply assets and terminals look set to restart soon.

U.S. Energy Secretary Chris Wright told a forum that flows through the Strait of Hormuz were close to pre-war levels.

He said at least 20 million barrels had passed through the strait in the past 24 hours. Wright warned, however, that full normalisation will take weeks because the strait needs to be demined.

UBS analyst Giovanni Staunovo noted most of the increase so far has been outbound — ships leaving the strait.

He said a sustained rise in inbound traffic, and thus a full return of trade patterns, will need shipping companies to regain confidence. That requires safety guarantees and mine clearance so insurance rates can return to normal.

The wider push of supply came as Iran prepared to increase sales after a temporary easing of U.S. sanctions. That prospect, together with resumed tanker movements, pushed down physical crude cargo prices in several regions.

But investment banks warned against overestimating how quickly Iranian volumes will return. Goldman Sachs said it does not expect a large rise in Iranian production even if sanctions relief is extended past the current Aug. 21 window. It added that China is likely to remain the main buyer of Iranian crude because European and U.K. sanctions on Iranian oil and vessels remain in place.

Last week’s accord to end the fighting allowed tanker traffic to resume through the strait, which Iran had effectively closed. The agreement also set a 60‑day negotiation period to address harder issues, including Iran’s nuclear programme. Wright said oil would continue to flow even if the deal falters, and that Iran would not be able to close the strait again.

Following improving supply signals, UBS lowered its Brent price forecasts to $85 a barrel at end-September and end-December, and $80 a barrel for end-March and end-June 2027.