Brent crude falls below $75! International oil prices have returned to pre-war levels.

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International oil prices, which have been continuously supported by geopolitical risks since the outbreak of the Middle East conflict, are rapidly giving back the previous war premium.

As shipping through the Strait of Hormuz returns to normal and the US and Iran send positive signals about ceasefire negotiations, Brent crude oil prices fell below $75 per barrel on Wednesday, returning to pre-conflict levels.

The market's focus is shifting from supply disruption risks to expectations of supply recovery. An increasing number of oil tankers are resuming passage through the Strait of Hormuz, and the export volume of major oil-producing countries such as the UAE has approached pre-war levels. The factors that previously drove up spot premiums and futures risk premiums are rapidly fading.

As of press time, Brent crude oil had fallen by more than 4% to $73.71 per barrel; WTI crude oil futures dropped 4.41% to $69.98 per barrel. Compared with the peaks reached during the war, international oil prices have cumulatively fallen by nearly 40%.

Transportation through the Strait of Hormuz Gradually Recovers

The core reason for the recent drop in oil prices is the market's evident easing of concerns about supply disruptions in the Strait of Hormuz.

According to reports, data shows an increasing number of oil tankers are turning their satellite positioning signals back on while passing through the Strait of Hormuz, reflecting that shipowners' confidence in the safety of the shipping route is recovering. The International Maritime Organization (IMO) stated that it has received relevant safety assurance information, enabling hundreds of vessels to leave the Persian Gulf.

Meanwhile, negotiations between the US and Iran about ending the war have also sent positive signals. Although differences remain and talks are expected to be protracted, the market has begun to price in expectations for an easing of geopolitical risks in advance.

According to Xinhua News Agency, US Treasury Secretary Bassent announced on social media on the 22nd that as part of the negotiation framework with Iran, the US Treasury has issued a 60-day general license, authorizing the production, delivery, and sale of Iranian oil.

UAE Exports Close to Pre-War Levels

The speed of supply recovery has outpaced market expectations, further weakening support for oil prices.

The International Energy Agency (IEA) estimates that the UAE's current crude oil exports have recovered to about 85% of pre-war levels. Alternative transport and export routes established during the war continue to play a role, so the actual shipping disruptions in the Strait of Hormuz are far lower than the market's initial concerns.

Data shows a large volume of crude oil has been shipped out via the strait in recent weeks, with the UAE alone selling about 60 million barrels of crude inventory stored in the Persian Gulf.

As supply continues to flow into the market, the spot market has started to show obvious signs of weakening. A key indicator measuring market tightness—the Brent crude oil near-term price spread has been falling continuously, and the spot premium for North Sea and West African crudes has also dropped significantly, indicating that the competition among buyers for prompt oil is cooling down.

Risk Cooling Triggers Oil Price Plunge, but “Critically Low” Inventories Limit Downside

As transportation recovers, exports increase, and diplomatic talks progress, the market is gradually realizing that the global oil supply chain is more resilient than expected, quickly erasing the previously accumulated risk premium.

However, there are still signs of tight supply in some local markets. The American Petroleum Institute (API) data shows that last week, Cushing, Oklahoma crude oil inventories fell by another 1 million barrels. If data to be released by the US Energy Information Administration (EIA) confirms this, Cushing stocks will fall below the key threshold of about 20 million barrels, widely regarded as the minimum operating level by the market.

Analysts believe that although cooling geopolitical risks have pushed oil prices down sharply, low US inventories and continued tightness in some regions worldwide mean that oil prices are unlikely to fully escape volatility in the short term.

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