- As tankers trapped in the Persian Gulf for months gradually leave the Strait of Hormuz, the flexibility of global crude oil supply has significantly improved, and the premium accumulated due to the US-Iran geopolitical conflict has been fully reversed.
- The prices of US West Texas Intermediate (WTI) and Brent crude oil futures are both under pressure, essentially falling back to the benchmark levels before the outbreak of Middle East conflicts at the end of February this year, reflecting the rapid fading of market risk premiums.
- Citi's latest research report indicates that the most challenging period for commodity curve arbitrage strategies may have ended, as the gradual reopening of the Strait of Hormuz is driving the reshaping of the forward curve, with forward price forecasts remaining bearish.
Steady Release of Core Channel Capacity
According to real-time shipping data disclosed by vessel tracking agency Kpler, since the US and Iran reached a phased agreement and reopened the Strait of Hormuz, more than 20 non-Iranian tankers have passed through this critical shipping channel, carrying approximately 35 million barrels of crude oil smoothly flowing into the global market. Related shipping data shows that the large capacity of crude oil trapped in the Persian Gulf for over three months is expected to arrive in major Asian consumer countries in early August. This marginal variable effectively alleviated the tight spot market situation for physical crude oil delivery, smoothing the previously extremely distorted near-far price spread structure caused by the channel blockade.
Wall Street Institutions Lower Forward Valuations
Citi's latest commodity strategy report clearly points out that with the significant cooling of geopolitical premiums, the supply and demand fundamentals of the global crude oil market are regaining pricing dominance. Citi's analysis team expects that in the next 6 to 12 months, as the normalization of the Strait of Hormuz's capacity resumes, the benchmark price of Brent crude oil may further decline to the range of $60 to $65 per barrel. Regarding commodity investment strategies, Citi suggests that market participants should pay attention to the potential for a phased rebound in the summer and proposes a strategy of reducing positions during the rebound window, indicating that the hedging costs borne by commodity curve arbitrage strategies are correspondingly declining.
Cross-Asset Linkage and Tail Risks
From the perspective of cross-asset volatility, the marginal decline in international oil prices has somewhat alleviated the imported inflation pressure on major developed economies, providing a potential macro window for subsequent monetary policy shifts by central banks. It has also triggered a chain revaluation in the foreign exchange and sovereign bond markets of oil-exporting countries. However, geopolitical tail risks have not been completely cleared. The Iranian Islamic Revolutionary Guard Corps (IRGC) Navy maintains a tough stance in its latest statement, emphasizing that all passing vessels must strictly follow the specific channels designated by Tehran and declaring the right to deal with any vessels that violate compliance passage regulations, indicating that the supply chain uncertainty of this core energy chokepoint will persist in the long term.
