Oil futures were on track to post their fourth consecutive weekly loss early on Friday as the tentative reopening of the Strait of Hormuz and the uptick in oil flows weigh down prices.
In Asian trade early on Friday, with U.S. markets closed for the July 4 weekend, both benchmarks, Brent and WTI, were gaining about 0.5% on some profit-taking.
Over the past three weeks, prices have slumped to nearly pre-war levels, with Brent now in the low $70s per barrel and WTI Crude trading below $70.
The U.S.-Iran memorandum to negotiate a deal and the reopening of the Strait of Hormuz have prompted hopes that immediate physical supply will jump in the coming weeks and ease concerns about shortages, especially in Asia.
The supply picture is improving, according to the Brent futures curve, ING’s commodities strategists Warren Patterson and Ewa Manthey wrote in a report on Friday.
“The increase in oil flows is putting growing pressure on the front end of the ICE Brent forward curve,” they said.
The forward curve is moving further into contango, the market structure in which prices for contracts dated further out in time are higher than the prompt contracts. This type of curve suggests that concerns about the immediate lack of crude supply have eased significantly.
Gulf producers, including Iran, are now rushing to ship oil out of the Strait of Hormuz, until the negotiation window expires in August, with uncertainties beyond that.
Saudi Arabia is estimated to have pushed over 10 million barrels of crude out of the Strait of Hormuz in recent days, as supertankers continue to load oil from the Saudi port of Ras Tanura in the Persian Gulf and Saudi Arabia is ramping up oil exports to Asia.
In the weeks since the U.S. and Iran announced the MoU, market sentiment has turned decisively bearish, some analysts say too bearish as oil is in oversold territory.
By Tsvetana Paraskova for Oilprice.com
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