The price of oil has reached its lowest point in nearly 15 weeks, despite ongoing uncertainty regarding the timeline for the reopening of the Strait of Hormuz.
Brent crude has decreased by nearly 2.5% today, settling at just over $81 per barrel, which follows a 4.75% decline on Monday. This marks its lowest price since March 4, coinciding with the onset of the Iran war.
Nevertheless, this price remains significantly higher than Brent’s pre-war level of $72.48 per barrel.
Oil traders are anticipating that the reopening of the Strait of Hormuz will result in an increase in oil supplies from the Middle East, following Donald Trump’s statement that the crucial waterway will reopen once the US and Iran finalize an initial memorandum of understanding.
However, economists caution that it will take time for traffic through the strait to normalize, as certain production facilities require reopening or repairs, and some oil and gas tankers are currently positioned in unsuitable locations.
The CEO of Mitsui OSK Lines, the world’s largest tanker operator, informed the Financial Times that shipowners will not resume transit through the Strait of Hormuz for several weeks until they are assured that the US-Iran agreement is “material.”
Kathleen Brooks, research director at XTB, elaborates, “Leaders of the largest shipping companies seek more than just a formal agreement; they require the clearance of mines and the cessation of all hostilities before tankers carrying cargo worth hundreds of millions of dollars can navigate the Strait without the risk of renewed tensions that could disrupt their journey.
“Therefore, even if a deal is reached to end the US/Iran conflict, the situation remains fraught with challenges.
“Brent crude continues to trade above $80 per barrel, and it is improbable that it will dip below this threshold until we observe successful passage of cargo ships through the Strait.”
