Stripped of bonus: oil is testing a dangerous frontier
Against the background of the opening of the Strait of Hormuz, the price of Brent has gone down: the reference grade is already cheaper than before the Middle East conflict. Analysts say that oil is rapidly losing the geopolitical premium accumulated during the conflict. Whether this can be considered the beginning of the collapse, and whether it means that the short period of expensive oil has already been completed, Izvestia investigated.
Rolled down
The price of Brent crude oil dropped below $75 per barrel on June 24 for the first time since February 27. On Thursday, the decline continued: Brent futures for August delivery reached $72.66 per barrel. That is, to the levels that were last observed before the start of the conflict between the United States and Israel with Iran.
From February to May, Brent traded mainly in the range of $78-88 per barrel due to the escalation of tensions in the Strait of Hormuz — attacks on tankers, blocking shipping.
A break below $75 is a signal: oil is rapidly losing the "geopolitical premium" accumulated during the conflict. The strait is officially open, and the US Treasury has issued a license allowing operations with Iranian oil and petroleum products until August 21, 2026.
Goldman Sachs records a sharp drop in the premium for the Hormuz risk from about $9-11 to $4-6 per barrel. This led to the movement of Brent from $85 to $75 and below, the bank's analysts state.
— There is a rapid "collapse" of the geopolitical premium that was embedded in prices after the escalation in the Middle East. The market is moving from trading in "fear" to trading in fundamental factors: the balance of supply and demand, OPEC+ policy, the state of the global economy and the prospects for sanctions," says Evgeny Shatov, partner at Capital Lab.
He'll lose more
According to preliminary forecasts, the complete removal of logistical barriers may "take away" another $4-6 risk premium from oil prices. This will overlap with the expected increase in supply.
According to the June report of the International Energy Agency (IEA), the market is moving towards a surplus in the second half of the year, with supply growth outside OPEC+ amounting to 1.5 million bpd. The forecast of the average Brent price for the third quarter of 2026 has been lowered to $ 77 per barrel, while in July, IEA analysts admit a temporary drop to $ 72.
Citi's latest estimates suggest that if shipping in Hormuz is fully normalized, Brent could gain a foothold in the range of $65-70 in the third quarter, with a possible short-term dip to $63.
In June, Barclays lowered its forecast for Brent for the third quarter of 2026 to $69, provided that the Hormuz works smoothly and OPEC+ countries fully implement the planned quota increase from July.
JP Morgan warned that a fully open strait could send Brent to $67-68.
Is it a landslide or not?
A number of analysts are already talking about the beginning of the collapse in oil prices, given that Brent has lost all its growth since the beginning of the US and Israeli operation against Iran: minus almost 40% from the maximum levels of March — April.
— The UAE has already reached the level of 85% of the "pre-war" figures. Considering that the UAE has left OPEC and OPEC+, the country will soon exceed its former oil sales levels," says Vladimir Zernov, financial analyst at Bitbanker.
If the situation continues to develop in this way, we will see Brent return to the trading range of $ 59-67, which was observed in recent months before the escalation around Iran, the expert believes.
However, the scenarios may be different, because shipping in the Strait is still "stalling".
— Only 24 vessels have followed the standard route with AIS signals enabled, more than 440 large tankers are still waiting at the strait, and the IMO is evacuating 11,000 sailors from 600 stranded vessels. The strait is formally open, but it is not working normally," says Guzel Protsenko, CEO of Alfa-Forex.
In addition, it is not yet clear whether the United States will extend the license for operations with Iranian oil after August 21, 2026.
"If the US license for operations with Iranian oil expires on August 21 without renewal, Iranian exports will decrease, supply will decrease, the price will receive support and may return to $78-82," the analyst points out.
According to her, this scenario is the most positive. But if the license is extended, additional Iranian volumes will remain on the market. And here Brent may well accelerate its movement towards $ 60 per barrel.
An interesting scenario is in which the United States ends its license to trade in Iranian oil, but the strait remains open. If this scenario is implemented, Iranian oil will be sold at a discount to China and, most likely, the completion of the license will have a limited impact on oil prices, Vladimir Zernov believes.
Not yet
Most experts consider the price level in the range of $70-72 to be a "strength test", and the key and "last" support zone is $59-60 per barrel. Next, OPEC+ oil-producing countries will step in: with prices below $ 60, the production of many projects becomes unprofitable. This will trigger an extraordinary OPEC+ meeting and the suspension of production growth.
At the same time, OPEC+ may start operating even earlier — already at $ 70 per barrel.
So, historically, OPEC+ ministers have started active verbal interventions already below the $75 per barrel mark. Therefore, the $70-72 zone is considered as a "possible" barrier that OPEC+ will try to protect.
— The first strong support is at the level of $72-73 per barrel. The range of $68-70 looks the most comfortable for most OPEC+ participants. If Brent steadily goes below $70, then there is a high probability that OPEC+ will begin discussing a more active production adjustment to prevent further price declines," explains Evgeny Shatov.
Thus, a steady downward trend in oil has not yet formed. Traffic through the strait has not been fully restored, a surplus is predicted, but has not yet been transformed into an increase in inventories. Without confirmation of an excess of reserves, the downward trend movement usually "resolves," the IEA notes.
The decisive moment will be the price reaction in the $70-72 zone, political decisions on the Iranian license and the real state of navigation in the Strait of Hormuz. This will determine whether the slide will turn into a full-fledged collapse or whether oil will return above $75.
Переведено сервисом «Яндекс Переводчик»
