Oil tanker U-turn in the Strait of Hormuz gathered pace on Thursday, with Morgan Stanley saying 35 oil and gas tankers had exited the passage as the Strait of Hormuz reopened faster than expected after the US and Iran signed a memorandum of understanding and began indirect talks in Qatar.
Brent futures fell $0.79, or 1.1 percent, to $70.78 a barrel by 06:42 GMT on Thursday. US West Texas Intermediate crude fell $0.84, or 1.2 percent, to $67.74 a barrel at the same time, after Qatar said Iran and the US had made progress in discussions about the waterway.
US and Iran MoU
The June 17 MoU between the US and Iran triggered a 60-day negotiation period for a permanent peace deal. Under the interim deal, Iran agreed to let ships transit through the passageway for 60 days without charge, and the reopening has moved faster than many traders expected after the strikes that began on February 28.
Before the US and Israel first launched strikes on Iran on February 28, the Strait of Hormuz handled one-fifth of global oil supply. That scale explains why the return of tankers to the route fed directly into crude pricing, with traders marking down barrels as passage resumed.
Morgan Stanley forecast
Morgan Stanley cut oil forecasts for the second time in two weeks and warned of the risk of a glut in the global oil market. The bank’s warning rests on two linked assumptions: that Hormuz flows recover and that Iranian oil exports keep moving during the temporary opening.
Mohammad Reza Farzanegan, a professor of economics at the Center for Near and Middle Eastern Studies and the School of Business and Economics at Philipps-Universitat Marburg, said, “I would be cautious in treating the surplus forecast as settled.” He added, “The market is now pricing a recovery of Hormuz flows and a temporary opening for Iranian oil exports, but both assumptions remain fragile.”
China and crude demand
China has downsized its imports and tapped into commercial stockpiles, adding another pressure point on oil prices. China had traditionally imported roughly half of its crude oil from the Middle East before the war, and has now resorted to importing crude from Russia, Kazakhstan, Brazil, Indonesia and Venezuela.
That demand shift matters because the current price move is being driven by both supply expectations in the Strait of Hormuz and weaker buying from China. The 60-day negotiation period now becomes the test: whether the passage stays open long enough for the temporary arrangement to hold, and whether the oil market keeps treating the rebound as durable.
