Crude Oil Prices Fall To Four-Month Low As Hormuz Flows Improve, Iran-US Talks Progress

Crude oil prices slipped to their lowest levels in around four months on Wednesday as traders responded to signs of improving oil shipments through the Strait of Hormuz and cautious optimism surrounding diplomatic efforts between the United States and Iran.

Brent crude futures fell 1% to $76.30 per barrel, while US West Texas Intermediate (WTI) crude declined 1.1% to $72.43 per barrel during early trade. Both benchmarks had already lost about 1% in the previous session and are now trading near their lowest levels since early March.

The decline comes as more oil tankers resume transit through the Strait of Hormuz, one of the world's most critical energy chokepoints. Vessel crossings have increased in recent days, although traffic remains below levels seen before the conflict began.

Shipowners are increasingly allowing vessels to cross the strait with their satellite tracking systems switched on, reflecting greater confidence in the safety of the route. The International Maritime Organization (IMO) has also received assurances that hundreds of ships stranded in the Persian Gulf can safely depart, as per Bloomberg (BBG).

Peace Talks Ease Supply Concerns

Market sentiment has also been influenced by diplomatic developments between Washington and Tehran. Both sides have indicated preliminary progress in talks aimed at ending the conflict that began in late February, although significant differences remain and negotiations are expected to take time.

Washington recently granted Tehran a 60-day sanctions waiver following initial peace discussions, allowing Iranian oil exports to continue. Analysts believe the move could help increase global crude supplies and ease fears of shortages.

Positive signals from the Persian Gulf are fuelling optimism about oil flows through the Strait of Hormuz. Vessel crossings increased in recent days, although they remain well below pre-war levels, ING commodity strategists said in a note cited by Reuters.

Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting, said that further progress in nuclear negotiations could push prices back to pre-war levels, as per Reuters.

Supply Recovery Gathers Pace

Oil futures have now retreated by more than one-third from the highs reached during the conflict, largely due to expectations of additional supply entering the market.

Producers across the Gulf region are gradually restoring output and exports. The United Arab Emirates has recovered to nearly 85% of its pre-war production levels, while Kuwait has withdrawn force majeure declarations and Iraq is increasing production, BBG reported.

The market is closely watching the pace of export recovery in the Middle East and the outcome of ongoing US-Iran negotiations, both of which are expected to shape oil prices in the coming weeks.

However, some signs of market tightness remain. Data from the American Petroleum Institute showed US crude inventories declined by 765,000 barrels in the week ended June 19, as per Reuters.

Separately, the stockpiles at the key Cushing, Oklahoma, storage hub may have fallen below the 20-million-barrel level often viewed as the minimum operating threshold, as per BBG.