Oil Prices Continue to Slide, Now at US$70.82 per Barrel

Global oil prices came under renewed pressure during Thursday morning trading, extending a weakening trend that has persisted for several days. Based on Refinitiv data as of 09.55 Western Indonesia Time, Brent crude oil stood at US$70.82 per barrel, down 1.05% from the previous close. Meanwhile, West Texas Intermediate (WTI) was trading at US$67.74 per barrel, weakening 1.22%. In less than two weeks, Brent has plunged around 12% from its position of US$80.57 per barrel on 19 June, while WTI has corrected nearly 11.6% from US$76.60 per barrel. The pressure on oil prices emerged after indirect talks between the United States and Iran in Doha concluded with what was assessed as a positive outcome. The Qatari government revealed that the two countries managed to achieve progress in negotiations focusing on the Strait of Hormuz, the strategic shipping lane that, before the outbreak of conflict, served as a passage for roughly one-fifth of the world’s oil supply. During the two-day talks, both parties discussed the smooth flow of maritime traffic and the release of frozen Iranian funds. At the same time, tanker traffic has begun to recover towards pre-conflict levels after being disrupted by mutual attacks over the previous weekend. The recovery of export activity from the Gulf region has triggered expectations that global oil supply will become increasingly ample. Market participants are now shifting their attention to the potential for a supply surplus, especially as OPEC+ member countries are expected to raise production targets again at their meeting this coming Sunday. Reuters reported that the production quota increase for August could reach around 188,000 barrels per day, matching the additional output for June and July. The prospect of extra supply is reinforcing selling pressure in the oil market, particularly as competition for market share is expected to intensify following the reopening of the Strait of Hormuz. From the United States, inventory data actually provided a slight cushion. The Energy Information Administration reported that US crude oil stocks fell by 3.8 million barrels to 408.4 million barrels last week, the lowest level since September 2018. However, the drawdown was smaller than analysts’ expectations in a Reuters poll, which had forecast a reduction of 4.5 million barrels.