BENGALURU, June 25 - Oil prices fell on Thursday to levels last seen before the start of the Iran war as expectations of rising supply from the Middle East outweighed demand concerns.
Prompt-month Brent crude futures for August delivery were down ¢51, or 0.7 per cent, to US$73.23 a barrel by 1201 GMT, while U.S. West Texas Intermediate lost ¢53 cents, or 0.8 per cent, to US$69.81 a barrel.
Both contracts hit their lowest since February 27.
August Brent was trading lower than September, which was priced at US$73.50, signalling ample short-term supply.
United States (US) Energy Secretary Chris Wright told a forum that flows through the Strait of Hormuz were close to those before the start of the Iran war, with at least 20 million barrels having exited the strait in the last 24 hours.
He added that a return to complete normalcy would take a few weeks, as the strait needs to be demined.
"Most of the increase in flows from the Gulf is outbound - ships exiting the Strait," said UBS analyst Giovanni Staunovo.
However, he noted that a significant increase in inbound flows requires shipping confidence to return, including safety assurances and mine clearance to allow insurance premiums to normalise.
Rising Middle Eastern supply, together with Iran set to boost sales after a temporary reprieve from US sanctions, drove down prices of physical crude oil cargoes around the world.
Goldman Sachs said it does not expect a large pick‑up in Iranian production, even if sanctions relief extends beyond the August 21 expiry.
On the demand side, China is likely to remain the main buyer of Iranian crude, as European Union and United Kingdom sanctions on Iranian oil and vessels remain in place.
An accord agreed last week to end the US-Israeli war, which began on February 28, has allowed the resumption of traffic through the strait.
It set up a 60-day period of negotiations to tackle tougher issues, such as Iran's nuclear programme. Wright said oil would continue to flow through the strait even if the deal did not hold, and that Iran would not be able to close it again.
UBS lowered its Brent price forecasts to US$85 per barrel for end-September and end-December, and US$80 per barrel for end-March and end-June 2027.
Meanwhile, sources with knowledge of Iraqi oil policy told Reuters that Baghdad will consider all available options if its Organisation of the Petroleum Exporting Countries (OPEC) quota is not significantly increased and has weighed leaving the producer group.
The prospect of Iraq considering an exit from OPEC follows the United Arab Emirates' surprise exit this year. Iraq is one of five founding members, and the group was formed in the Iraqi capital.
On the geopolitical front, Ukrainian President Volodymyr Zelenskiy said that the country's military hit an oil depot in Russia's Krasnodar region and two oil refineries in the Ufa region on Thursday, 1,500km from the Ukrainian border.
