Workarounds for the Strait of Hormuz chokepoint and a drop in crude imports to China helped ease the impact of lost Persian Gulf oil
China has significantly lowered its imports of crude oil since the start of the Iran war.
Oil prices on Tuesday logged their biggest quarterly drop in six years, after an extended U.S.-Iran cease-fire in June and more ships passing through the Strait of Hormuz helped pull global crude prices down by more than 20% for the month.
Crude prices in June were responding to a less dire global supply backdrop than initially feared, helped by reductions in Chinese crude imports, transit workarounds beyond Hormuz and the release of emergency stockpiles to offset Persian Gulf supply disruptions.
At about $70 a barrel, prices are now near levels seen before the Iran conflict. Those levels have arrived much sooner than expected, and that's not only because more barrels are coming from the Persian Gulf, said Alex Kuptsikevich, chief market analyst at FxPro.
"The market has adapted to the most far-reaching crisis in the history of the oil market," Kuptsikevich said. The search by Persian Gulf states for alternative routes has made it possible to partially meet demand from Europe and Asia for the next couple of months, he wrote in Tuesday commentary.
Along with a rise in U.S. oil exports and a drop in China's energy imports, that could create a "distinctly bearish backdrop for Brent," he said, noting that Morgan Stanley cut its fourth-quarter forecast for Brent crude to $75 from $80.
On Tuesday, Brent for August delivery (BRNQ26), which expired at the end of the session, edged down by 0.3% to settle at $72.92 a barrel. It was down 38% for the quarter, for the biggest quarterly loss since the first quarter of 2020, according to Dow Jones Market Data. Oil prices plunged at the onset of the pandemic in 2020 because many of the world's economies went into lockdown mode - triggering a wave of short-lived economic recessions.
A similar price correction in oil has been unfolding in recent weeks on optimism around efforts to end the Iran war. For the month of June, Brent prices were down nearly 21%.
U.S. benchmark West Texas Intermediate crude for August delivery (CLQ26) (CL.1) settled at $69.50 a barrel, down 1.8% Tuesday. It lost 20% for the month and declined 31% for the quarter, which was also the biggest quarterly decline since the first quarter of 2020.
The oil market did a "good job in making up for the supply cut off" from Iran, which is why prices retraced so sharply, Edward Meir, an analyst at financial-services platform Marex, told MarketWatch.
Most countries tapped into reserves, with China in particular "slashing their imports heavily, thus offsetting some of the supply cutbacks," Meir said. In addition, there was an element of demand destruction, especially in Asia, where flights were canceled, rationing was imposed and import duties on oil were hiked, he said.
'Whenever you get a supply bottleneck, people figure ways around it.' Edward Meir, Marex
"Whenever you get a supply bottleneck, people figure ways around it," Meir said. There is now more oil moving through Saudi Arabian pipelines than ever before, and the United Arab Emirates and Oman are planning to expand their pipeline under the Strait of Hormuz to "circumvent it entirely," he said.
Other producers stepped up output as well, notably the U.S., Venezuela and Iraq, with the latter sending its oil out through Turkey, Meir said. The "combination of all these things" explains the big selloff, he said, adding that oil likely will get back to preconflict levels soon.
Prices might still find support as countries decide to replenish their depleted crude-oil stockpiles, Meir said.
And if the conflict in the Middle East escalates, that could trigger a rise in prices again, said FxPro's Kuptsikevich.
Yet if the conflict doesn't escalate further, Kuptsikevich said, the long-term outlook for Brent looks "rather bleak," particularly as Middle Eastern production recovers and Iranian output potentially surges to 3.3 million barrels per day by the end of the year following the lifting of U.S. sanctions.
-Myra P. Saefong
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(END) Dow Jones Newswires
June 30, 2026 15:07 ET (19:07 GMT)
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