Crude Oil Extends Slide as Hormuz Flows Normalize

Key Moments

Brent crude traded at $71.79 a barrel and WTI at $68.50, with both benchmarks holding near levels last seen before the Iran war.
Citigroup projected Brent could fall to $60 a barrel by year-end, citing normalizing shipping, softer Chinese demand, and weaker-than-expected inventory draws.
The six-month Brent spread moved into contango, signaling an emerging supply surplus as Gulf exports and expected Opec+ output increases add to the glut.

Geopolitical Premium Unwinds as Hormuz Shipping Recovers

Oil prices were on track for a fourth straight weekly decline on Friday as traders continued to remove the geopolitical risk premium that had been embedded in crude during the Iran war. The unwinding came as tanker traffic through the Strait of Hormuz recovered following an agreement reached between Tehran and the US.

At 3.34pm UAE time, Brent crude was unchanged at $71.79 a barrel, down 0.32 per cent, while West Texas Intermediate (WTI) slipped 0.28 per cent to $68.50. Both contracts had dropped sharply on Thursday to levels last seen before the conflict began, when Brent settled at $72.48 a barrel and WTI at $67.02 on February 27.

Bank Views Turn Bearish on Fundamentals

Citigroup revised its outlook for Brent, now expecting prices to decline to $60 a barrel by the end of the year. The bank pointed to “fundamentals [that] are rapidly reasserting themselves” as maritime flows return to more normal patterns. It also highlighted weaker Chinese crude purchases and a smaller-than-anticipated drawdown in inventories as additional headwinds for prices.

Citigroup analyst Francesco Martoccia said the bank continues to advocate selling into summer price rallies and forecasts Brent to trade in a $60 to $65 range by December. Citi also anticipates that the US-Iran deal will remain intact and that a permanent accord will eventually be concluded.

Goldman Sachs and Morgan Stanley also adopted cautious tones in their assessments, flagging the potential for the market to swing back into oversupply as shipping volumes through the Strait of Hormuz recover.

Norbert Rucker, of Julius Baer, referred to a “magnet in the sub-70s” exerting downward pressure on Brent, arguing that the physical market has shifted from deficit to surplus as crude flows out of the Gulf. He said this transformation has been intensified by hedge funds rapidly rotating from long positions to shorts in oil futures.

Gulf Exports Rebound Under Interim Deal

Shipping activity through the Strait of Hormuz has partially resumed under the interim arrangement, even as equity markets across the Gulf stayed subdued during the week of indirect talks between the US and Iran, which concluded with little visible progress.

Crude supplies from Gulf exporters have rebounded, with the UAE leading the recovery. The country’s exports jumped nearly 30 per cent last month, approaching their highest level since 2017, as Abu Dhabi relied more heavily on the Habshan-Fujairah pipeline to circumvent the strait.

Opec+ Supply and Producer Dynamics

The prospective buildup in supply is being amplified by expectations that Opec+ will authorize another production increase at its meeting on Sunday. Sources indicated a potential rise of about 188,000 barrels per day for August, as the coalition’s seven core members continue to unwind a 1.65 million barrels per day voluntary cut.

The UAE, which exited Opec in May citing a misalignment between its production capacity and assigned quota, is no longer constrained by group decisions and is exporting without such limits. Iraq has warned it may also leave the organization unless its quota is increased to match its production capability and post-war reconstruction requirements.

Market Structure Shifts to Contango

The emerging glut in crude is now evident along the futures curve. The six-month Brent spread turned negative this week, pushing the market into contango for the first time in months, a configuration typically associated with abundant supply.

Contract / Indicator	Latest Level / Change	Context
Brent crude	$71.79 a barrel, down 0.32%	Flat on Friday, near pre-war settlement of $72.48 on February 27
WTI	$68.50 a barrel, down 0.28%	Trading close to pre-war level of $67.02 on February 27
Expected Opec+ August increase	≈188,000 bpd	Part of unwinding a 1.65 million bpd voluntary cut
Citigroup year-end Brent target	$60 a barrel	Bank recommends selling summer rallies; sees $60-$65 range by December

Equities Diverge: Record Dow, Weak Tech

Oil’s largely flat performance this week stood in contrast to US equities, where the Dow closed at a record high above 52,900 on Thursday. Earlier in the week, technology and semiconductor stocks had rallied in part on optimism that the US-Iran truce would endure, but they reversed course amid renewed concerns over stretched valuations in artificial intelligence-related names ahead of Friday’s holiday closure.

The Nasdaq Composite, which had gained as much as 2 per cent on Monday, fell 0.8 per cent on Thursday. US chipmaker Micron declined 7 per cent, while Applied Materials dropped more than 7 per cent. Marvell and SanDisk each slid around 10 per cent.