ING analysts Warren Patterson and Ewa Manthey note that ICE Brent ended the second quarter sharply lower as markets price a recovery in Persian Gulf supply and record US output. They highlight rising tanker confidence into the Persian Gulf, strong US production and exports, and potential Chinese refined product exports as factors capping Oil prices despite ongoing geopolitical risks.

Persian Gulf flows weigh on Brent

"The oil market finished the second quarter yesterday weak, with ICE Brent down a little more than 38% in the April-June period, the weakest quarterly performance since the first quarter of 2020 when the Covid crisis slammed demand. The oil market continues to take an optimistic view on a supply recovery from the Persian Gulf, despite recent flare-ups between the US and Iran. Indirect talks in Doha this week have reportedly been positive."

"Tanker vessel movements in the Strait of Hormuz still appear limited. Total tanker crossings, which include both inbound and outbound movements, are estimated at around 11 on Tuesday, down from a peak of 24 last Wednesday. Admittedly, there has been a slight pickup in inbound tanker traffic, suggesting that shipowners are becoming increasingly confident about moving vessels into the Persian Gulf."

"If this trend accelerates, it becomes a clear headwind—and potentially a direct challenge—to our view that oil prices should rise from current levels."

"The latest data from the EIA shows that the US boosted crude oil production to a record level in April. Supply climbed to a record 13.93m b/d, up 1.6% month-on-month and 3.5% higher year-on-year. Monthly figures echo the weekly trend, showing total crude and petroleum product exports surging to a new record 13.61m b/d in April, up 1.74m b/d MoM and 3.26m b/d YoY."

"There are reports that China eased restrictions on refined product exports after tightening controls on exports during the early stages of the war in the Persian Gulf. The government reportedly told some state refiners that they can resume exports of gasoline and diesel. Obviously, exports will still have to fall within government quotas."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)