Oil prices managed to close slightly higher on Thursday, staging a late-session recovery to reclaim lost ground. During Asian and European trading hours, prices had continued their sharp decline. U.S. WTI crude, with inventories persistently falling to multi-decade lows, saw its front-month spread briefly dip into contango. The Shanghai crude contract fell over 5%, nearly erasing all its gains since 2026. The contract faced particular pressure as Iraq, a key crude grade for its delivery, recently offered substantial discounts to promote its Basra crude, leading to losses significantly larger than those in European and American markets. The discount for Dubai spot crude against swaps widened to over $4 per barrel, the largest since May 2020, as the market struggled to cope with overwhelming pressure from the supply side.
Saudi Aramco has increased export volumes from its Ras Tanura port and shifted to spot sales. According to reports, since resuming loadings in the Persian Gulf, Saudi Arabia's average daily crude shipments surged to 6.3 million barrels over the six days through Wednesday, nearing pre-war levels. Previously, the UAE's average crude and condensate exports in June hit a record high of about 3.7 million barrels per day. In Russia, domestic refining capacity has been significantly reduced due to Ukrainian drone strikes, creating tightness in domestic fuel supplies and forcing increased crude exports. Russian crude exports are currently soaring to record highs, with data showing average daily shipments reaching 4.13 million barrels in the four weeks to June 28th, leading to a significant accumulation of crude at sea. Since the U.S. lifted its maritime blockade, Iran's exports have exceeded 40 million barrels, but portions that failed to find timely buyers continue to accumulate offshore. Overall, the unexpected surge in supply from multiple countries has created immense short-term pressure, shattering market confidence. Continuously downgraded expectations are driving oil prices lower.
The concentrated negative factors in the short term combined to push oil prices down more than many anticipated. This almost retaliatory decline appears to have priced in supply-side negatives quite thoroughly, with some suspicion of overcorrection. Going forward, the focus will be on the extent of recovery in crude production from various countries after the initial shockwave of increased short-term exports, and whether the demand side can show positive recovery signals as lower prices provide stimulus during the traditional peak consumption season against a backdrop of high temperatures. Currently, refined product crack spreads in Europe and America have surged to multi-year highs, and margins in Asia, including previously low-profit regions like China, have generally rebounded, which is expected to boost refinery operating rates. Often, the most pessimistic moments can signal a turning point. An assessment suggests current oil prices may be oversold, with relatively low risk of further sharp declines in the near term. The fact that oil prices managed to close higher from such a dire situation shows some resilience. Additionally, following the release of U.S. non-farm payroll data on Thursday evening, the dollar and interest rates fell significantly, reflecting a market interpretation that cooled expectations for further rate hikes. This rebound in risk asset prices also helped create an environment for oil to stop falling and recover. From a risk-reward perspective for trading, focusing on capturing rebound opportunities currently offers better value. Continuously monitor market expectations and new catalysts. Pay attention to timing and participate cautiously.
Daily Market Movements
WTI front-month crude futures rose $0.11, or 0.16%, to settle at $68.69 per barrel. Brent front-month crude futures gained $0.23, or 0.32%, to settle at $71.80 per barrel. The INE crude futures contract in China edged up 0.05% to settle at 441.8 yuan per barrel.
The U.S. Dollar Index fell 0.54% to 100.87. The Hong Kong Exchange's USD/CNH rate fell 0.12% to 6.7574. The U.S. 10-year Treasury note price rose 0.1% to 109.66. The Dow Jones Industrial Average gained 1.14% to close at 52,900.07.
Recent Key Developments
Russia's gasoline supply crisis is beginning to affect Central Asian countries, some of which lack sufficient domestic fuel production and have long relied on Russian imports. Landlocked Kyrgyzstan stated this week that it has appealed to regional partners including Kazakhstan, Azerbaijan, and Turkmenistan for assistance in ensuring energy security and maintaining stable supplies of petroleum products in its domestic market. Gasoline prices have surged in Uzbekistan, Kyrgyzstan's western neighbor, while Kazakhstan, the region's largest economy, is strengthening border controls to curb illegal fuel exports. Due to refinery outages caused by Ukrainian drone attacks, Russia is facing gasoline shortages, severely impacting fuel supplies. According to local authorities and media reports, by the end of June, approximately 90% of Russian regions had experienced fuel rationing or some form of supply disruption.
According to trade sources and shipping data, at least five very large crude carriers (VLCCs) carrying a total of 10 million barrels of Saudi crude have departed from Ras Tanura port and sailed through the Strait of Hormuz. Simultaneously, Saudi Aramco is shifting to spot pricing mechanisms to accelerate sales to Asian markets. Saudi Aramco resumed loading operations at Ras Tanura, the world's largest oil port, on Friday after a near four-month halt. The state oil company is accelerating shipments and deliveries to Asia, exacerbating the spot supply glut. Trade sources indicate that besides using its "Bahri" tanker fleet, the world's largest crude exporter is also offering spot-priced crude to Asian customers to stimulate demand amid intensifying supplier competition.
Since Saudi Arabia resumed tanker loadings within the Persian Gulf, its crude exports have surged to near pre-war levels, providing further evidence that oil supply from regional producers is recovering following a provisional U.S.-Iran peace agreement. Data compiled from tanker tracking shows that over the six days through Wednesday, Saudi Arabia's average daily crude shipments reached 6.3 million barrels. This shipment volume is roughly in line with the 2025 average and nearly 90% of the level seen in February. In February, before the Iran conflict erupted, Saudi Arabia and its Gulf neighbors had significantly increased oil supply.
Reports indicate that as of July 1st, the volume of Iranian crude and condensate held in floating storage at sea has exceeded 58 million barrels. Estimates show that over 90% of this volume has no final destination confirmed, with many tankers currently labeled as "awaiting orders" or with Singapore listed as the next destination, suggesting possible ship-to-ship transfers in the Strait of Malacca.
These stocks are mainly distributed around the Persian Gulf, the Indian Ocean, and near Singapore. Meanwhile, data from Kpler Ltd. shows that Iranian crude staying in Asian waters for more than seven days has exceeded 20 million barrels, an increase of nearly 18% from a week ago.
Although Iran stated on Wednesday that exports have exceeded 40 million barrels since the U.S. lifted its maritime blockade, the portion that failed to find timely buyers continues to accumulate at sea. Iran must complete sales by mid-August, otherwise it risks revenue losses and a potentially weaker position in negotiations with Washington. Previously, the U.S. lifted oil sanctions on Iran and ended port blockades in mid-June, a key provision of the provisional peace agreement.
However, European and UK sanctions remain in place, complicating insurance arrangements. Simultaneously, some ports are cautious about receiving crude transported by Iran's "dark fleet," further increasing transaction difficulty.
Policy uncertainty is also dampening buyer interest. U.S. Treasury Secretary Scott Bessent stated on Fox News on Tuesday that Iranian crude is still trading at a discount, with buyers remaining cautious. The market widely worries that the U.S. might reimpose sanctions if negotiations break down; furthermore, if the current window is terminated early, related transactions could even be forced to halt mid-execution.
The demand side also lacks support. India has not sent clear demand signals. Although Indian Oil Minister Hardeep Puri met with his Iranian counterpart in New Delhi, he made no commitment to resume imports. Informed sources reveal that Indian state-run refiners have secured crude supplies through the end of August and are therefore not currently considering purchasing Iranian crude, while still waiting for clearer guidance from the U.S. regarding dollar payment mechanisms.
These sources also stated that once payment channel issues are resolved, India may reassess import arrangements; if sanctions are fully lifted, refiners might also resume longer-term purchases.
Against a backdrop of ample supply, the Asian market currently has access to crude from other Persian Gulf producers that can be transported normally through the Strait of Hormuz, as well as alternative resources procured from more distant regions during the conflict, reducing the attractiveness of Iranian crude. However, price could still change the situation. If Iran offers significant discounts, some refiners with locked-in supplies might make space by reselling existing inventory or increase operating rates stimulated by lower costs, thereby opening up outlets for this stranded crude at sea.
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