Gasoline eases globally ahead of Strait of Hormuz agreement Oil prices remain near their lowest levels in three months as markets estimate that the agreement between the US and Iran to reopen the Strait of Hormuz will lead to a significant increase in global supply.

Brent is trading at $78.43 per barrel, following a drop of approximately 15% over a four-day period, recording the longest losing streak of the year. US crude oil is moving at $75.42 per barrel. The temporary agreement, which is expected to be officially signed on Friday, includes significant economic incentives for Tehran, including the ability to immediately resume oil exports.

Markets Price in De-escalation 

Oil has fallen sharply in recent weeks as investors believe that the de-escalation of the conflict between Washington and Tehran will reduce pressure on the global energy market. Producers, shipping companies, and traders are now trying to assess whether the agreement can be sustained in the long term and how quickly vessel traffic through the Strait of Hormuz will be restored. Denis Kisler, senior vice president of trading at BOK Financial Securities, estimates that the process will not be immediate. As he notes, many traders consider it likely that the US Navy will escort commercial ships during the first few weeks, while minesweepers operate simultaneously, a fact that will temporarily limit the speed of flow restoration. Despite the obstacles, he underscores that markets operate with a forward-looking horizon and that the chances of oil transport through the region restarting soon are increasing.

What the Draft Agreement Provides 

Although technical details are still being finalized, a 14-point draft memorandum provides the clearest picture yet of the agreement's content. The text provides for the start of a 60-day period of negotiations aimed at definitively ending the war and imposing new restrictions on Iran's nuclear program. Among the core terms is Tehran's obligation to guarantee the safe passage of commercial vessels, as well as the commitment of the United States to lift the naval blockade they have imposed on the Strait of Hormuz. The strategically important maritime passage connects the Persian Gulf to the Indian Ocean and, under normal conditions, handles about 20% of the global oil supply.

The Return to Normalcy Will Take Time 

Analysts warn that the full restoration of flows will not happen overnight. Paras Jain, head of global transport and logistics research at HSBC, notes that the market should expect a gradual restart rather than an immediate return to normalcy. As he explains, shipping companies do not wish to reroute their schedules yet again after months of adjustments, without having clear guarantees that the situation will remain stable.

Lifting Restrictions on Iranian Exports

The draft agreement also includes a provision for the issuance of special waivers by the United States, which will allow exports of Iranian crude oil, petrochemical products, and their derivatives. The waivers will also cover related services, including banking transactions, insurance, and transport. This prospect reinforces estimates that significant quantities of Iranian oil will soon return to international markets.

Indications From the Derivatives Market

The rapid easing of conditions in the market is also reflected in the structure of Brent contracts. The spread between the two nearest contracts formed at just 23 cents per barrel in a state of backwardation. Although this structure is still considered bullish for the market, the gap has narrow drastically from the $9.65 recorded in early April, when supply concerns were at their peak.

Breathing Room for Consumers and Inflation

The drop in crude oil is dragging fuel prices down with it, offering relief to consumers and governments worried about inflation. In the United States, the average price of gasoline has slipped back near $4 per gallon, following the high of $4.56 recorded in May. Developments in the energy market are expected to be at the center of discussions at the Federal Reserve, which meets today regarding monetary policy. Although markets do not expect a change in interest rates at this specific meeting, the trajectory of energy prices remains a key factor for the future decisions of the American central bank.

Inventories Continue to Decline

Despite expectations for an increase in supply, oil inventories continue to fall at a rapid pace. According to estimates by a US industry organization, crude inventories in the United States decreased by 8.3 million barrels last week. The drop in inventories at the Cushing hub in Oklahoma, which serves as a major benchmark for US oil, was also significant. Official figures from the US government are expected later in the day and will give a clearer picture of the actual state of the market.

Source: Brief