The effective closure of Hormuz triggering the drawdown of commercial and strategic inventories
Published Wed, Jun 17, 2026 · 06:13 AM
[SINGAPORE] Oil logged its longest run of declines this year as the US-Iran deal to reopen the Strait of Hormuz boosted expectations for a revival in supply, with leading Wall Street banks reducing their price forecasts and key market gauges tumbling.
Global benchmark Brent slid for a fourth session, settling under US$79 per barrel, the lowest level since early March. The US and Iran are preparing to formally sign an interim peace deal on Friday (Jun 19) that would allow tankers trapped since the start of the conflict to exit the key waterway. The commodity extended losses after The Wall Street Journal reported the agreement will allow Iran to immediately sell oil.
The US is set to offer Iran other financial gains including the right to tap a US$300 billion development fund and waivers for exports of Iranian crude oil, petrochemical products and their derivatives, according to a near-final draft of the deal. A number of Iran-linked oil tankers have been shifting position as the country prepares to sign the deal.
Both Morgan Stanley and Goldman Sachs cut price outlooks for the coming quarters, with the latter now assuming Persian Gulf exports will reach pre-war levels by the end of July, a month earlier than previously forecast.
The Middle Eastern Dubai and Murban oil benchmarks both flipped into a bearish contango structure, signalling oversupply. That comes as more barrels are expected from the region and the UAE keeps seeking to sell its barrels in tenders.
In another sign of deteriorating conditions, commodity trading advisers, which tend to exacerbate price moves, switched to net-short in Brent for the first time since January, according to data from Kpler. The algorithmic-based traders are now sitting 9 per cent short in Brent, compared with 27 per cent long just a day earlier, the data analytics firm said.
“CTAs are sellers of crude oil, and we expect these systematic funds to reduce positions by 2 to 4 per cent under all pricing scenarios over the next five trading days,” said Ryan McKay, senior commodity strategist at TD Securities, which uses a separate methodology from Kpler. “This selling flow, combined with deal optimism and the expectation of a near-term flood of Hormuz-trapped oil flowing into the market, could see the final push lower for crude.”
Oil’s drop to the lowest since early March has erased the bulk of the gains seen during the conflict, potentially easing inflationary pressures just as policymakers at the Federal Reserve assess interest rates this week.
Still, many questions remain over how the interim pact will be implemented, including concerns over shipping safety, operating rules and whether the chokepoint, which carried about a fifth of oil supply before the war, will stay toll-free.
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Neither side has released the complete text of the agreement, and US officials have given conflicting accounts of when that might happen. Meanwhile, ship owners and insurers are still approaching the reopening with caution.
“Much is still to be negotiated and key risks remain, but for now, this is a key step towards a de-escalation of the conflict and higher oil exports via the Strait of Hormuz,” Morgan Stanley analysts including Martijn Rats wrote in a note. “We see 50 per cent of production back by September, and 80 per cent by December, slightly faster than before.”
At Goldman Sachs, analysts including Daan Struyven said the bank expected Brent to average US$80 in the fourth quarter, US$10 less than its earlier call.
RBC Capital Markets struck a more cautious tone. “We think it will take months to reach anything close to Feb 27 levels,” analysts including Helima Croft said in a note, referring to the date before the start of the war. “Peak Hormuz flows may actually be in the rearview mirror,” they said.
The effective closure of Hormuz, which has been subject to a double blockade by Iran and the US, triggering the drawdown of commercial and strategic inventories. The US’ emergency supply of crude hit its lowest level since 1983, according to data released on Monday. BLOOMBERG
