Brent Crude Rises Back to $76 as US Responds to Iran

WTI and Brent Surge 5% on Escalating Tensions
Dwindling Strategic Reserves Deepen Supply Shock
Long-Term Outlook: Prices May Drop to $60 per Barrel

International oil prices surged by more than 5% following Iran’s attack on an oil tanker in the Strait of Hormuz and the United States’ subsequent military response. However, this upward trend is expected to fluctuate depending on the course of military confrontation between the two nations. Since the signing of a memorandum of understanding (MOU) between Iran and the U.S. to end the conflict, the crude oil market has shown a faster-than-expected recovery, with some predicting that next year’s oil prices could fall to the $60-per-barrel range.

People are looking at a cargo ship anchored near the Strait of Hormuz on the 30th of last month (local time). Photo by AP Yonhap News Agency

According to foreign media including NBC News on the 7th (local time), West Texas Intermediate (WTI) crude for August delivery surged over 5% during trading, exceeding $72 per barrel. Brent crude for September, the international benchmark, also rose by 5.3%, trading above $75 per barrel.

This spike in oil prices came after the U.S. Department of the Treasury announced that sales of Iranian crude oil must cease by July 17, moving up the previous deadline from August 21. The United States has also launched attacks against Iran. Iranian media reported that, following the announcement of the U.S. airstrikes, explosions were heard in areas such as southern Sirik and Qeshm. The U.S. Navy-led Joint Maritime Information Center (JMIC) has raised the threat level for passage through the strait from “substantial” to “severe.” This response came as a countermeasure after Iran attacked vessels flying Middle Eastern flags.

OilPrice.com, a petroleum industry publication, analyzed that the market shock was amplified by both reduced oil inventories and the fallout from the military clashes. According to a mid-June report from the U.S. Department of Energy, the Strategic Petroleum Reserve has dropped to 340.3 million barrels, its lowest level since 1983. Energy consulting firm Energy Aspects noted in a report at the end of last month that “U.S. crude oil stocks and the strategic reserve are at their lowest levels since 1985,” and that “there is no buffer left to absorb a recovery in demand.” Ilya Bushuev of the Oxford Institute for Energy Studies also told a foreign media outlet, “While the market can still function despite depleted inventories, oil prices going forward will be much more vulnerable to sharp swings.”

In the longer term, the global oil market is expected to recover more quickly than previously anticipated. According to the U.S. Energy Information Administration (EIA)’s monthly report released that day, crude oil production lost due to the Iran conflict is forecast to fall to an average of 1.4 million barrels per day in the fourth quarter of this year. In May, disruptions affected an average of around 11.2 million barrels per day. The report also projected that Brent crude prices will decline to an average of $65 per barrel by 2027, significantly lower than last month’s forecast of $79. Analysts, including oil traders, agree with this outlook. Citigroup projected that if navigation through the Strait of Hormuz normalizes, Brent crude could fall to $60 per barrel by the end of the year.

This content was produced with the assistance of AI translation services.