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(Bloomberg) — Oil headed for a substantial weekly drop as the US-Iran interim peace deal saw shipping through the Strait of Hormuz start to return to normal, easing the global crude market’s biggest ever supply shock.
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Global benchmark Brent fell toward $79 a barrel, tumbling by about 9% this week, while West Texas Intermediate for August was near $75. Ships carrying stranded oil have began to make their way out of the waterway, while Kuwait said that it will start ramping production back up.
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On Thursday, vessels carrying nearly 10 million barrels of oil either appeared outside the strait or were sailing through, including the first Saudi-owned tankers since the conflict began more than three months ago. In peacetime, Hormuz used to see daily transits of oil and products totaling about 20 million barrels, according to the International Energy Agency.
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US Vice President JD Vance said on Thursday that 12.5 million barrels of oil had passed through the Strait of Hormuz the night before. That figure may represent the highest daily tally since the war began at the end of February.
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In a sign of producers adjusting to the shifting situation, Abu Dhabi National Oil Co. told customers to resume loadings of its crude oil from ports within the Persian Gulf, according to a notice sent by the company that was seen by Bloomberg. Adnoc didn’t declined to comment.
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Crude’s selloff means that futures have given back almost all of the gains triggered by the war, which erupted after the US and Israel attacked Iran over its nuclear program. The strait — which connects the Persian Gulf to global markets and normally carried about a fifth of global oil supply — had been subject to a double blockade by both Tehran and the US.
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US President Donald Trump hailed the developments, pushing back against criticism from Iran hawks, including some allies, that the deal conceded too much to Tehran. “The Markets are loving what is happening with Oil Prices way down, and Stocks way up,” Trump posted on social media.
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While crude prices have sunk, a full reopening of Hormuz may prove to be a tricky and drawn-out operation. To run smoothly, the process needs to be choreographed, with ships in the right place, wells restarted, infrastructure repaired and agreement on a de-mining operation. Some shipowners remain cautious about conditions in the waterway and the Persian Gulf.
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“Everyone would like to get the ships out, but the mood is that you don’t necessarily need to be the first,” said Jan Rindbo, chief executive officer of D/S Norden A/S. “With traffic resuming that will build confidence. But it’s still fragile, it will not take a lot for that confidence to disappear again.”
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