Oil prices continued their downward trajectory on Tuesday, though the pace of the decline moderated, with the market showing a tug-of-war between buyers and sellers throughout the session. The price action indicates that the bearish camp, which is focused on the prospect of increased supply following the reopening of the Strait of Hormuz, currently holds the upper hand, outweighing the bullish view based on the logic of falling inventories. The latest API data showed a crude inventory draw of 765,000 barrels, which was smaller than the expected draw of 4.995 million barrels, leading to a slight pullback in prices after the release. However, the need for a technical rebound from oversold conditions is building, suggesting the risk of further sharp declines is limited and a bounce could materialize at any time.
The navigational status of the Strait of Hormuz remains a key market focus, with the U.S. and Iran continuing their strategic maneuvering. Former President Trump stated that, based on significant concessions made by Iran, he has agreed to allow the Strait of Hormuz to remain open and not impose a maritime blockade. He also claimed that a record 19 million barrels of oil flowed through the Strait yesterday. Aggregated information suggests the number of vessels transiting the Strait is recovering. An Iranian official confirmed the Strait is open to commercial shipping, though a military source indicated that only a certain number of vessels are permitted to pass daily, with the exact number adjusted based on daily conditions. A joint statement from Oman and Iran further clarified that all arrangements concerning the Strait of Hormuz must fully respect their sovereignty and sovereign rights. The statement noted that the two sides will draft an agreement on fees and services for the Strait and will also hold talks with other coastal nations in the region.
The increasing certainty of Strait of Hormuz navigation has reinforced expectations of higher supply. However, the reality of critically low inventories remains a countervailing force, providing logical grounds for both bulls and bears. The upcoming 60-day period covered by the agreement remains crucial for the crude market. If the geopolitical situation does not deteriorate further, a return to $100 per barrel seems unlikely. Nonetheless, following last week's steep sell-off, the probability of a rebound and technical recovery this week is rising. Market participants should pay close attention to timing and exercise caution.
Daily Market Movements
WTI crude futures for the front month fell $0.65, or 0.88%, to settle at $73.21 per barrel. Brent crude futures for the front month declined $0.72, or 0.93%, to settle at $76.80 per barrel. INE crude futures closed down 1.52% at 492 yuan.
The U.S. Dollar Index rose 0.37% to 101.37. The USD/CNH rate on the Hong Kong Exchange increased 0.18% to 6.752. U.S. 10-year Treasury note prices gained 0.09% to 109.33. The Dow Jones Industrial Average dipped 0.09% to close at 51,666.84.
Key Recent Developments
Strait of Hormuz Sees 36 Vessels in a Day, Highest Since Conflict Began, as Energy Trade Gradually Recovers
At least 36 commodity-carrying vessels transited the Strait of Hormuz on Monday, marking the highest single-day passage count since the outbreak of the Iran conflict, according to a Tuesday report. This indicates shipping activity in the vital waterway is gradually emerging from the shadow of geopolitical tensions.
This figure represents roughly one-third of the pre-conflict daily average of about 120 vessels. Data from maritime analytics firms shows that while absolute levels remain well below normal, the accessibility of the passageway is steadily improving.
The Strait of Hormuz is one of the world's most critical energy shipping chokepoints. Prior to the conflict, it facilitated the transport of over one-fifth of global oil and liquefied natural gas, and it is also crucial for grain and consumer goods entering the Gulf region.
The recent recovery in transit volume aligns with expectations of progress in U.S.-Iran negotiations. Two stranded supertankers successfully passed through the Strait last Sunday, and several LNG ballast carriers linked to Qatar have entered the waters in recent weeks. The focus now shifts to whether transit volumes can stabilize at higher levels and whether shipping insurance premiums and voyage times will gradually normalize, which would further alleviate market concerns over energy supply disruptions.
Weaker U.S. Demand: A Cushion for the Global Market
A growing market consensus suggests China's oil imports are unlikely to recover to previous levels. While imports in February stood at 12.6 million barrels per day, the second quarter saw a significant drop of approximately 3.3 million barrels per day compared to the same period in 2025. Factors such as the transition to alternative energy, reduced demand for diesel and gasoline, and pressure on refinery margins have collectively contributed to weaker demand, directly weighing on Brent prices.
Latest data shows China's crude imports in May fell to a multi-year low (around 7.8 million barrels per day), which has acted as a buffer against the conflict's impact on global prices. China is also releasing crude from its strategic reserves, further alleviating global supply tightness.
Oman and Iran Issue Joint Statement: Emphasize Sovereignty, Pledge Joint Navigation Management Agreement
A joint statement from Oman and Iran shows Oman's support for the Islamabad Memorandum of Understanding signed between the U.S. and Iran, emphasizing the importance of continued dialogue and coordination to ensure its successful implementation. As two littoral states sharing the Strait of Hormuz, Oman and Iran reaffirmed their commitment to ensuring safe passage through the Strait in accordance with relevant international law, while stressing their sovereignty and sovereign rights over the territorial waters of the Strait. The two sides also discussed matters related to the Strait as covered in the Memorandum. They agreed to continue dialogue through a joint working group of their foreign ministries, with the aim of reaching an internationally compliant agreement on the future management of navigation, related services, and corresponding fees for the Strait of Hormuz. In this context, they also agreed to hold discussions with other littoral states in the region and relevant parties.
Trump: Iran Has Fully Agreed to Long-Term Nuclear Inspections, a Prerequisite for Further Talks
Former U.S. President Trump stated in a post that, despite Iranian protests and contrary false statements, along with relentless attempts by what he termed the "fake news media" to downplay the U.S. achievement, Iran has fully and completely agreed to accept long-term (even permanent!) nuclear inspections at the highest level. This, he said, would ensure "nuclear integrity." He asserted that if Iran did not agree to this, there would be no further negotiations. Based on this and other significant concessions from Iran, he has agreed to allow the Strait of Hormuz to remain open and not impose a maritime blockade. However, all naval vessels will remain on standby to reinstate a blockade if necessary, though he views this as highly unlikely at present. Funds released by the U.S. Treasury and/or sanctions relief will be placed in an escrow account controlled by the U.S. and used to purchase food and medical supplies, which must be sourced entirely from the U.S., including corn, wheat, and soybeans from American farmers. These are supplies Iran urgently needs. He characterized the situation as a humanitarian crisis, stating the need for immediate assistance before it is too late. He concluded by saying negotiations are progressing well.