Iran reshuts Hormuz days after reopening it, casting doubt on the price slide
Iranian oil is back, and the rally is over.
US sanctions and a naval blockade had cut Iran's crude exports to a six-year low of 260,000 bpd in May.
Since then, more than 25m barrels have crossed the blockade line in a single week, the head of the National Iranian Oil Company, Hamid Bovard, told state TV on Sunday, according to Reuters.
The flood of returning supply has erased oil's war premium.
Brent crude fell US$1.53, or 1.90 percent, to US$79.04 a barrel by 0656 GMT on Monday, after touching highs near US$120 earlier in the conflict, the same outlet reported, with US West Texas Intermediate at US$76.53 ahead of the July contract's expiry.
Brent dropped more than 8 percent last week as traders priced in stranded cargoes and the potential lifting of US sanctions on Iranian oil.
A memorandum of understanding between Washington and Tehran, signed last week, reopened the Strait of Hormuz and lifted the US naval blockade, Reuters reported.
Gulf producers moved fast to capture the opening.
Kuwait Petroleum Corp offered July crude, Abu Dhabi National Oil Company issued a fourth monthly tender, and Iraq plans to restore output to between 4.2m and 4.3m bpd.
Iran is repositioning aggressively.
A flotilla of 10 Iranian-flagged supertankers carrying close to 20m barrels was sailing from Chabahar toward Asia for likely teapot refineries in China, according to US advocacy group United Against Nuclear Iran, cited by Reuters.
"The signal has gone out and they are repositioning in expectation of the end of the US blockade. Clearly, a system reboot is in progress," the group's senior advisor Charlie Brown said.
The downside still has limits. Some 118 tankers carrying cargoes from other Gulf producers remained stuck inside the Gulf, according to Kpler analysis cited by Reuters, with shippers waiting for proof the strait is safe.
"A political agreement may formally reopen the strait, but safe passage must still be proven in practice," Greece-based shipbroker Intermodal said in a note.
Those doubts hardened over the weekend.
Iran announced on Sunday that it had again closed Hormuz, citing Israeli and US violations of the deal, sending crossings down sharply, the same outlet reported, while US President Donald Trump threatened to restart the war.
US and Iranian officials still wrapped up a first round of talks in Switzerland on Monday, with Iranian Foreign Minister Abbas Araqchi saying Tehran had won waivers for oil and petrochemical exports, the release of some frozen assets and a reconstruction plan.
Analysts flagged the fragility.
"Recent developments show that moving towards a more permanent deal will be challenging, with very real risks of a flare-up in hostilities during the 60-day ceasefire," ING analysts wrote, Reuters reported.
Torbjorn Soltvedt, principal Middle East analyst at Verisk Maplecroft, said the gap between the announcement and the signing gave "both sides scope for issuing conflicting statements on the agreement."
A second risk sits in how Hormuz gets governed.
Iran's Persian Gulf Strait Authority said in an advisory that "no vessel is permitted to pass through the Strait of Hormuz without a valid passage permit issued by the PGSA," and reserved the right to charge insurance fees, Reuters reported.
According to CNBC, Iran will negotiate the strait's future administration with Oman and Gulf states once a 60-day toll-free period ends.
The arrangement leaves open the prospect of tolls on what shippers call an international waterway.
AP News said the MOU commits the US, with regional partners, to a reconstruction plan of at least US$300bn for Iran and to the termination of sanctions on an agreed schedule, with Treasury waivers for crude exports issued immediately.
Al Jazeera reported that the plan has drawn Republican criticism, including from former Vice President Mike Pence and former UN Ambassador Nikki Haley, who argued it does too little to curb Tehran's nuclear ambitions.
David Roche of Quantum Strategy warned on Monday that Middle East supply only looks near prewar levels because traders are running down crude in storage and on tankers, CNBC reported.
Once those stockpiles thin, the market will be exposed.
Goldman Sachs added that repeated supply shocks could hasten the shift to electric vehicles and erode long-term demand.
