Brent falls to $70 as Saudi crude clears Hormuz and US pump prices ease
Crude fell below where it was before the Iran war as Saudi Arabia loaded exports back to near-normal rates, and that is the number US fuel buyers should be watching this week. Brent slipped to near $70 in London, its lowest since the week before the fighting began on Feb. 28. WTI dipped to near $67. Both are now under prewar levels.
The Saudi rebound
Aramco has cleared about 10 million barrels through the Strait of Hormuz in recent days, with at least five supertankers loaded out of Ras Tanura and more queued behind them. Vessel-tracking data compiled by Bloomberg put Saudi loadings at almost 90% of previous levels after the terminal restarted late last week. Flows out of the Persian Gulf are recovering faster than most desks expected, and the market repriced the war premium right back out.
For a jobber, the read is simple. The supply scare that ran crude up in April is unwinding, and wholesale should keep softening as long as the strait stays open. Whether it stays open is not settled. Iran said this week it will not meet US envoys to negotiate, and that came after strikes on two ships in Hormuz. The barrels are moving now. The politics behind them are not settled.
Inventories at a 40-year low
Gasoline prices fell again in New Jersey even as domestic gasoline inventories are at their lowest since 1984. Thin stocks and falling retail prices at the same time is an odd pairing, and it is worth keeping in view. Cheaper crude is pulling the pump down for now, but there is not much cushion in the tank if a refinery trips or demand firms into summer driving. Any supply hiccup could bite harder than usual with stocks this lean.
The glut call
Analysts are back to forecasting oversupply. Morgan Stanley's commodity team pointed to what it called the twin drivers still in place, high US exports and low Chinese imports, and reopening Gulf flows on top. Irina Slav at OilPrice argued the glut talk may be running ahead of reality given Iran's stance and the ship strikes. Both can be true. Crude could ease further if exports normalize, and it could snap back on one bad headline out of Hormuz.
Nigeria's NNPC booked $3.15 billion in May revenue, down from $3.62 billion in April as prices came off the war highs, even though output rose to 1.73 million bpd. It is a small reminder that lower crude squeezes producers before it helps buyers.
What to watch
Whether Saudi loadings hold near 90%, whether Iran's refusal to talk turns into more disruption in the strait, and how long US gasoline stocks can stay this thin without a price reaction.