Why Oil Prices Are Falling Even as Tankers Remain Trapped

Market Bets on Hormuz Reopening Despite Slow Progress

Crude oil prices are staging a notable retreat this week, with ICE Brent futures poised to close with an $8 per barrel loss, settling around the $80 per barrel mark. This downward pressure on prices comes even as the actual movement of crude tankers through the vital Strait of Hormuz remains sluggish following the recent U.S.-Iran ceasefire agreement. While the accord offers a potential 60-day window for trapped vessels, the pace of disembarkation has been surprisingly subdued. Nevertheless, market participants appear to be pricing in a future where the critical waterway will soon operate freely.

The geopolitical backdrop remains tense, with lingering issues between Israel and Lebanon adding to the uncertainty. Iran has made efforts to reassert its authority over the Strait of Hormuz in the initial days after the memorandum of understanding was signed. Despite these assertions, the broader oil market is clearly leaning towards the eventual reopening of this crucial chokepoint.

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OPEC Projects Sustained Demand Growth

In a separate development, the Organization of the Petroleum Exporting Countries (OPEC) released its 2026 World Oil Outlook, presenting an optimistic forecast for crude demand. The group anticipates an additional 8 million barrels per day of demand growth by 2030. Furthermore, OPEC projects that global peak oil consumption will not be reached until around 2050, estimating consumption at that point to be approximately 124 million barrels per day.

Shifting Geopolitical and Energy Landscapes

Tehran has indicated that passage through the Strait of Hormuz still requires authorization from the Persian Gulf Strait Authority. This stance could pave the way for future tolling arrangements if the current 60-day ceasefire does not hold. Meanwhile, the White House has allowed its sanctions waiver for Russian oil to expire on June 17. This move, coinciding with President Trump's comments on increased global crude supply from the U.S.-Iran deal, places additional pressure on Moscow, especially as Russian oil exports reached 6 million b/d in May.

Encouragingly for global supply, Iran's crude exports have seen a resurgence. Three tankers, collectively capable of carrying 5 million barrels, successfully transited the Gulf of Oman this week. This marks a significant shift after a two-month blockade and signals a potential recovery in Gulf export volumes.

In other energy news, Norway's state oil company, Equinor, has officially withdrawn its 2030 renewable energy targets. At its New York capital markets day, the company announced a strategic pivot, allocating 90% of its capital expenditures to oil and gas projects, a substantial increase from the 50% allocation pledged a year prior.

Brazil's Finance Ministry has indicated a willingness to end fuel subsidies for diesel and gasoline if crude oil prices remain stable around the $80 per barrel level for at least one month. The current monthly cost of these subsidies is estimated at approximately $600 million.

Pakistan's energy sector has seen a dramatic increase in coal usage. Average coal generation hit an all-time high of 4.28 GW in May, driven by higher coal imports. This surge was a direct response to disruptions in usual Liquefied Natural Gas (LNG) deliveries from Qatar, exacerbated by the Strait of Hormuz closure during a period of extreme heat (45-50° C).

Kuwait has lifted its force majeure declarations on upstream operations. The nation, which experienced a significant production drop from 2.6 million b/d in February to 580,000 b/d last month due to the Hormuz situation, is now focused on restoring output.

China's coking coal imports are expected to rise in 2026. This is due to ongoing disruptions affecting over 150 mines in Shanxi province, China's largest coal-producing region. Buyers are increasingly turning to suppliers in Canada and Australia to fill the supply gap.

In southern Iraq, oil production is showing a robust recovery. The Basra Oil Corp. reported pumping approximately 1.5 million b/d, a significant increase from around 900,000 b/d a month ago, indicating a swift rebound in a region heavily impacted by the Strait of Hormuz closure.

Shares of BHP, the world's largest iron ore miner, fell by over 5% on Friday. The company cited cost overruns and a substantial $2.3 billion charge related to its Jansen potash project in Canada, marking the third time cost estimates for this project have been exceeded.

Saudi Aramco, the national oil company of Saudi Arabia, is actively exploring opportunities to expand its international crude oil storage capacity. This strategic move comes in response to the ongoing U.S.-Iran conflict, with the company already operating storage facilities in South Korea, Japan, and Egypt.

Ukraine has conducted a second drone strike on Russia's Moscow refinery within days. The refinery, with a capacity of 240,000 b/d, immediately suspended oil product sales on Russia's Spimex exchange, raising concerns about potential gasoline shortages.

Despite the U.S.-Iran ceasefire, Iraq is pursuing alternative export routes. The Iraqi government plans to export 50,000 b/d of crude through Syria starting in July, building on successful diversions of fuel oil and naphtha. Baghdad is pursuing these alternative flows regardless of the ceasefire's duration.

The Bigger Picture

The current market sentiment suggests that traders are prioritizing the potential for increased global oil supply over immediate geopolitical risks. The anticipation of the Strait of Hormuz reopening, even with a slow start in tanker movements, is a powerful narrative that is overshadowing concerns about regional stability. This focus on supply normalization is contributing significantly to the downward pressure on crude prices.

The decision by Equinor to heavily reinvest in oil and gas projects, coupled with OPEC's optimistic demand outlook, signals a continued reliance on fossil fuels in the medium term, despite the global push towards renewables. This dichotomy presents a complex environment for energy markets, balancing immediate supply dynamics with long-term energy transition goals.

The developments in Iran and the U.S. sanctions policy towards Russia are critical factors influencing global energy flows. The expiration of waivers and the resumption of Iranian exports create a dynamic supply picture that traders are closely monitoring. Furthermore, the strategic decisions of major oil producers like Saudi Aramco to enhance storage capacity highlight the ongoing efforts to manage supply volatility in an unpredictable geopolitical climate.