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Informist, Monday, Jun. 29, 2026

 

NEW DELHI – Although crude oil prices have collapsed after the US and Iran agreed to reopen the Strait of Hormuz and improve vessel transit, ING Think cautioned that oil flows remain well below the pre-war levels and uncertainties linger. The market research firm expects supply tightness to persist through the third quarter of the year, longer than the market's expectation of a supply recovery by the end of July.

 

"Over the last week, it is estimated that oil flows have averaged around 7m b/d (7 million barrels per day) vs pre-war flows of 20m b/d," ING said, adding that flows only need to improve to 14 million bpd to get to pre-war levels as Saudi Arabia and the United Arab Emirates are already bypassing the strait with the help of pipeline diversions.

 

However, ING is doubtful if these flows can be sustained, as many of these movements are essentially trapped vessels finally moving out of the Persian Gulf. "Inbound vessel movements are more modest, which suggests flows could pull back once previously stranded ships have left the Persian Gulf," it said.

 

PRICES

"We believe the market has overshot to the downside," ING said, adding that at $70 per-barrel levels, the oil market currently has close to zero geopolitical risk premium priced in. The memorandum of understanding signed between the US and Iran on Jun. 17 has led to a significant sell-off in the oil market. Premature expectations of supply normalising and weakness in physical markets drove the sell-off, ING said, adding that the market is being "too optimistic" over the speed and sustainability of supply recovery.

 

"Our balance sheet continues to show that the oil market will be tight through the third quarter, and this follows the significant inventory drawdowns since March," it added. Furthermore, global oil inventories have significantly tightened since the war, leaving the market more vulnerable to the pre-war environment.

 

However, recent estimates suggest the demand destruction has been far more aggressive than expected, providing some relief about tight inventories. "The IEA estimates that 2Q26 (Apr-Jun) demand fell around 5 million b/d YoY, compared to a previous estimate of a 2.45 million b/d year-on-year decline over the quarter," ING said, quoting International Energy Agency estimates.

 

"Looking forward, the key question is how quickly demand recovers. The IEA expects that global oil demand will only return to YoY growth in the final quarter of this year," it added. At 2046 IST, the most-active August contract of West Texas Intermediate Crude on NYMEX was up 1.7% at $70.44 per barrel.  End

 

US$1 = INR 94.54

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Afra Abubacker

Edited by Rajeev Pai

 

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