Crude oil prices dropped more than 6% to $75.50 per barrel on Tuesday, their lowest level since the first week of March, wiping out most of the risk premium added after the outbreak of conflict in the Middle East. The decline comes amid expectations that exports from GCC countries will resume shortly.
Both the US and Iran have continued to signal that they will sign a memorandum of understanding this Friday. Under the reported terms, tankers from both sides will be allowed to pass through the Strait of Hormuz once the agreement is in place, with Washington not opposing Tehran’s immediate redeployment of tankers.
The anticipated increase in supply from the region is set to replenish refineries worldwide, supported by higher export quotas from OPEC+ and increased output from the UAE, which exited the cartel during the conflict. This follows a period in which US Strategic Petroleum Reserves fell to their lowest level in 43 years.
At the same time, additional Iranian supply is expected to help rebuild Chinese oil inventories. These stockpiles had been drawn down in recent months, as the world’s largest crude importer held back on purchases to avoid pushing prices higher.
