Brent curve points to oil oversupply after Hormuz reopening

HOUSTON, Texas: Oil markets are beginning to signal a near-term supply glut as tankers resume leaving the Strait of Hormuz, releasing crude that had been stranded in the Gulf during the Iran war.

Brent crude contracts for September delivery traded 12 cents above those for August delivery on June 24, marking the first time since the conflict began in late February that later-dated oil was priced higher than prompt supplies.

The shift suggests traders expect ample crude to be available in the immediate term, even as supplies could tighten again in the coming months.

“We have the prospect of a big rush in physical supply out of the Arab Gulf. So we are in a mini glut for now as demand needs to be tempted back,” said Neil Crosby, head of research at Sparta Commodities.

Around 20 million barrels of oil passed through the Strait of Hormuz in the previous 24 hours, U.S. Energy Secretary Chris Wright said at the Reuters Global Energy Forum in New York.

Wright described the shipments as a return to normal flows after an interim agreement between the United States and Iran helped reopen the strategic waterway.

Shipping data showed that three tankers carrying about 5 million barrels of crude were leaving the strait on June 24. The vessels had been stranded during the conflict, which disrupted traffic through the route used to transport a significant share of the world’s oil.

“People are selling the flood of oil coming to the market from the Middle East, and trying to unload contracts fast. There is a lot of selling in August,” said Bob Yawger, director of energy futures at Mizuho.

Physical crude cargoes were also being offered at discounts in markets around the world as Middle Eastern supply increased quickly.