Brent crude futures fell 80 cents, or 1.09%, to $70.80 a barrel on July 2, while U.S. West Texas Intermediate crude declined 90 cents, or 1.28%, to $67.75 a barrel. This marks the second consecutive session of decline as U.S. and Iranian negotiators discuss maritime traffic through the Strait of Hormuz.
In the previous session, both benchmarks had dropped more than 1%, settling at their lowest levels in four months. The discussions in Doha focused on the unfreezing of Iran's funds and the resumption of shipping traffic, which had been disrupted following an Iranian attack on a cargo ship. Iran is seeking international recognition of its control over the Strait of Hormuz, even if it has to achieve that by force, Reuters reported.
Tehran has announced plans to start charging tolls on vessels from mid-August, ending the toll-free period under the initial agreement. Despite some improvement in tanker movement, experts caution that a complete reopening of the Strait of Hormuz will take time and require coordination of vessel movements, restarting oil wells, repairing damaged infrastructure, and agreements on de-mining operations.
Analysts noted that global oil inventories were depleted during the prolonged disruption to shipping through the Strait of Hormuz and will take time to rebuild. They added that stockpiles could continue to decline before additional supplies from the Gulf start reaching international markets.
Last month, Saudi Aramco Chief Executive Officer Amin Nasser warned that disruptions in the Strait of Hormuz could delay the return of stability to global oil markets until 2027. He said prolonged interruptions could affect nearly 100 million barrels of oil supply every week.
Background
The Strait of Hormuz is a critical chokepoint for global oil transportation, with a significant portion of the world's oil supply passing through it. Any disruptions in this region can have far-reaching implications for global energy markets and economic stability.
As the situation develops, stakeholders will be closely monitoring the progress of negotiations between the U.S. and Iran. The potential impact on global oil supply and prices remains a key concern for markets worldwide.
