Oil prices extended their decline on Thursday, July 2, falling by about one per cent for a third consecutive trading session after Qatar indicated that Iran and the United States had made progress in indirect negotiations over the Strait of Hormuz.
Brent crude futures dropped 77 cents, or 1.1 per cent, to $70.80 per barrel, while US West Texas Intermediate (WTI) crude fell 84 cents, or 1.2 per cent, to $67.74 per barrel as of 0256 GMT. Both benchmark contracts had already fallen by more than one per cent in the previous trading session, reaching their lowest levels in four months.
Market sentiment was also influenced by expectations that the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) could approve another increase in oil production targets when the group meets on Sunday, July 5. A Reuters report, citing sources familiar with the discussions, said the oil-producing alliance is likely to agree to a further output hike from August.
Meanwhile, Bloomberg reported that crude shipments through the Strait of Hormuz, a strategic waterway that typically carries around one-fifth of the world’s oil supply, had exceeded 10 million barrels per day. Despite the recent decline in oil prices, analysts cautioned that broader inflationary pressures remain.
Charu Chanana, an analyst at Saxo Markets, warned that lower energy prices should not be interpreted as an indication that inflation has been fully brought under control. She said wage growth, services inflation, tariffs, supply chain disruptions and government spending could continue to keep inflation above the US Federal Reserve’s target even as oil prices ease.
Chanana also warned that renewed geopolitical tensions, delays in reopening the Strait of Hormuz, a collapse in nuclear negotiations or the breakdown of the current ceasefire could quickly restore the geopolitical risk premium in global oil markets.
