Page 38 - Policy & Economic Report - July 2025

POLICY AND ECONOMIC
ROEILPO&RGTAS MARKET

Oil Market

Crude oil price – Monthly Review

Benchmark crude oil prices continued their downward trajectory in June, driven by the interim
ceasefire agreement between the United States and Iran, which facilitated a significant recovery
in oil flows through the Strait of Hormuz. North Sea Dated crude prices declined by approximately
US$31/bbl during the month, reaching US$68/bbl by early July—the lowest level since January
and approximately US$2/bbl below pre-conflict levels. However, the escalation in hostilities on
7–8 July has introduced renewed uncertainty into the market outlook and could disrupt current
forecasts that anticipate the market shifting into a surplus next year.

Following the United States' temporary easing of restrictions on Iranian exports and the provision
of security support for non-Iranian shipments, tankers delayed in the Strait of Hormuz resumed
their transit. Consequently, total Gulf oil exports, including volumes transported through
alternative routes bypassing the Strait, increased by 6.5 mb/d in June to 16.1 mb/d. While this
represents a substantial month-on-month increase, export volumes remained significantly below
the 24 mb/d average recorded prior to the onset of the conflict.

Crude oil and condensates accounted for approximately 85% of the monthly increase, supported
by the drawdown of floating storage and onshore inventories that had previously reached near-
capacity levels. As a result, Gulf oil production increased by a comparatively more modest—but
still significant—3.5 mb/d, although production remained 11.4 mb/d below pre-conflict levels.

Hedge funds and other money managers closed a large volume of speculative long positions in
June, with the selling being more pronounced in the ICE Brent futures market. Between late May
and the week of 30 June, hedge funds and other money managers sold an equivalent of 245 mb
across Brent and WTI futures and options. Speculators were increasingly betting on easing
geopolitical risk premiums. At the same time, they sharply raised short positions to their highest
level since December 2025, fuelling volatility and accelerating the decline in oil futures prices.
Combined futures and options net long positions in ICE Brent and NYMEX WTI dropped to their
lowest level since January 2026.

Crude spot prices dropped in June given continued selling pressure in futures markets. This
occurred despite supportive market fundamentals, including declining global oil stocks and a
continued recovery in global refinery throughput during June. Dubai prices declined as
expectations of improved crude availability and higher Middle East exports reduced concerns
about prompt supply tightness. WTI came under pressure from softer export demand as the
Brent-WTI spread narrowed sharply, reducing arbitrage opportunities into Europe and Asia.
Lower US crude stock levels and continued export flows helped limit the decline, with WTI falling
by less than Brent and Dubai.

In June, the ORB value dropped by $24.80/b, m-o-m, to average $89.75/b. West and North
African Basket components Bonny Light, Djeno, Es Sider, Rabi Light, Sahara Blend and Zafiro

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