Oil News: WTI and Brent Face Volatility if Hormuz Deal Fails to Restore Flows
Key Points:
- Brent has lost nearly $20 on Hormuz deal hopes, but Gulf exports are still running 40% below pre-war levels.
- October Brent holds a $1.50 premium to November, showing prompt crude supply remains tight despite deal optimism.
- Only 80 million barrels remain in Gulf storage, ruling out the large post-ceasefire release that hit markets in June.
Brent has dropped nearly $20 from its July 23 high on a deal that has not been signed, a route that has not reopened and ships that are still not moving freely. Iran and Oman may be close to agreeing on coordinates for a Hormuz route, but Tehran wants control over who comes in and visibility over what goes out. That is not a reopening. That is a managed chokepoint, and the last time the market bought diplomacy this hard in June, the optimism lasted about three weeks before renewed fighting killed it. Meanwhile the physical market is tighter than the futures price suggests. Only about 80 million barrels remain stored in the Gulf, prompt Brent is in backwardation and diesel margins are running 50% above mid-June levels after Russian refinery damage pulled supply out of the market.