Brent Oil Surpasses $73 as Strait of Hormuz Tensions Continue
The global oil market is facing significant volatility this summer as Brent crude prices exceed $73 per barrel due to escalating tensions between the United States and Iran in the Strait of Hormuz. This instability has made the world's most crucial oil shipping corridor increasingly vulnerable, potentially leading to abrupt price fluctuations in the coming weeks.
Strait of Hormuz: Traffic Disruptions and Reduced Throughput
The Strait of Hormuz, the world's most important oil shipping channel, is operating at reduced capacity following recent attacks. On June 24, 59 vessels were recorded transiting the strait, the highest number since the US and Iran signed the Memorandum of Understanding (MoU). However, vessel traffic has significantly decreased this week, with only approximately 20-25 ships passing through daily.
Notably, most vessels are currently entering rather than exiting the Hormuz Strait, suggesting shipping companies are awaiting safer conditions to transit. This delay in resuming normal operations could impact production plans for Middle Eastern oil producers, as Kuwait and Iraq have significantly increased crude oil production this week to 70-75% of pre-war levels.
| Indicator | Value | Comparison |
|---|---|---|
| Vessel transits through Hormuz (June 24) | 59 vessels | Highest since MoU signing |
| Daily vessel transits (this week) | 20-25 vessels | Significant decrease |
| Global crude oil on tankers | 1.29 billion barrels | Highest since US-Iran conflict |
The Oil Market Faces Summer Challenges
The continuation of missile attacks between the US and Iran has not reduced shipping companies' risks of war and insurance costs. However, oil flow from the Gulf continues to show an increasing trend compared to the period before the MoU signing.
ICE Brent crude prices have increased by more than $1 per barrel this week, surpassing the $73 per barrel mark. Any new development could push oil prices in either direction at this point, indicating the market's fragility.
Negative Developments in the Strait of Hormuz
Iran's Ministry of Foreign Affairs has announced that vessels will only be permitted to transit the Strait of Hormuz via the northernmost lane, closest to the Iranian coast, during the 60-day ceasefire period. Iran requires Oman to direct all vessels toward the Iranian coastline, effectively reducing the strait to a single-lane passage.
The Slow Recovery of Refined Product Supply
The recovery of refined product supply will take longer than crude oil flows. Price differentials for refined products in the US, Europe, and Asia all increased last week, while inventories declined.
Energy Market Developments Over the Past Week
Mergers and Acquisitions
- San Mateo Midstream, a joint venture between Matador Resources (NYSE:MTDR) and Five Point Infrastructure, has agreed to acquire Cardinal Midstream Partners for $752 million, enhancing its natural gas assets portfolio in the Delaware Basin.
- TotalEnergies (NYSE:TTE) of France and BP (NYSE:BP) of the UK each hold 10% equity in the UAE's Bab Gas Cap project operated by ADNOC, supporting the UAE's natural gas self-sufficiency plans.
- Italy's ENI (BIT:ENI) and ADNOC's investment arm XRG have signed agreements for three exploration blocks in Argentina's Vaca Muerta basin, each holding 32% interest in the fields expected to supply Argentina's upcoming LNG projects.
- Libya's OLA Energy Holdings (the country's sovereign wealth fund) announced the acquisition of TotalEnergies' (NYSE:TTE) assets in Ethiopia, becoming the largest foreign company in Ethiopia's retail market.
Notable Events on June 30, 2026
- China Eases Export Restrictions: Chinese authorities have relaxed export restrictions on certain refined products this week, partially lifting the ban imposed on March 12, as state-owned refineries are now permitted to freely export gasoline and diesel starting from July.
- Extreme Temperatures Drive Henry Hub Higher: US natural gas futures rose above $3.3/MMBtu for the first time since February, driven by forecasts of extreme heat in the northeastern United States, with New York expecting record temperatures above 100°F on Thursday and Friday this week.
- UAE Changes Pricing Policy: ADNOC, the UAE's national oil company, is changing its pricing method for offshore crude oils, separating from previous links to IFAD Murban futures and pricing differentials against the Dubai benchmark from now on.
- Russia Extends Price Cap Restrictions: Russian President Vladimir Putin has extended the country's ban on supplying crude oil and refined products to entities and individuals if direct or indirect contracts specify a price cap mechanism of $44.10 per barrel.
- Pipeline Fire Impacts Indian Petrochemicals: A naphtha pipeline supplying Haldia Petrochemicals (private) of India caught fire on the morning of June 30, reducing regional naphtha demand prospects and pushing up polyethylene prices as Haldia is India's second-largest producer.
- Crackdown on Iraq's Oil Sector: Iraq's new Prime Minister Ali al Zaidi has launched a corruption investigation, leading to the arrest of Deputy Oil Minister Ali al-Bahadli (currently under US sanctions) and several senior officials in the ministry, accused of embezzling public funds.
- Japan Announces New Energy Strategy: Caught off guard by the Hormuz crisis, Japan's government is now planning to restructure its energy strategy with a new plan expected by the end of August, committing to enhance energy capabilities and accelerate decarbonization, seen as a pro-nuclear move.
- Pakistan Expedited LNG Purchase: Pakistan LNG (the state entity) has purchased an extremely prompt cargo from Qatar, delivery from June 30 to July 4, at a price of $16.74/MMBtu, approximately $2/MMBtu higher than market prices, as the Asian nation faces summer power outages.
- Cyprus's Gas Hopes Boosted: US oil giant ExxonMobil (NYSE:XOM) announced commercial viability on its Glaucus and Pegasus offshore gas discoveries, with combined estimated reserves of 8-9 Tcf, with an investment decision (FID) for these projects expected in 2029 and first production in 2033.
- EU Imposes New Steel Import Quotas: The European Commission has published new steel import quotas to protect the region's industry from global excess capacity, reducing the duty-free import quota by 47% to 18.3 million tons and adding new 50% tariffs on steel products.
- World Bank Abandons Climate Finance: The World Bank has announced it will abandon its commitment to allocate 45% of annual financing to climate-beneficial projects, reflecting criticism from Scott Bessent who stated that this goal 'causes inefficiency and distorts decision-making'.
- India Lifts Domestic Fuel Restrictions: India's government has removed restrictions on commercial sales of gasoline and diesel previously imposed, which had set a maximum limit of 200 liters per day per customer, citing improved domestic oil supply and refinery operations.
- Automakers Invest in Aluminum: Responding to automotive sector copper demand forecasts, Ferrari and BMW have both launched new electric vehicle models replacing copper wiring with aluminum, currently only a quarter of copper futures prices, while saving up to 20% in overall wiring weight.
Summary of the Energy Market Situation
The Strait of Hormuz continues to operate at only half capacity, causing the oil market to increasingly price in a period of summer volatility. The resumption of missile attacks between the US and Iran has not helped shipping companies reduce war risks and insurance costs, but oil flow from the Gulf continues to show an increasing trend compared to the period before the MoU signing.
ICE Brent crude prices have increased by more than $1 per barrel this week, surpassing the $73 per barrel mark. Any new development could push oil prices in either direction at this point, indicating the market's fragility.
In this context, countries and energy companies worldwide are adjusting their strategies, from China easing export restrictions, to Japan restructuring its energy strategy, and automakers shifting to alternative materials like aluminum to reduce costs.
The volatility in the Strait of Hormuz and the continuous developments in the global energy market will certainly shape the economic landscape in the coming months, particularly during this summer when energy demand typically peaks.
Tom Kool for Oilprice.com
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