Oil Market Faces Chaotic Rebalancing Act After Hormuz Reopening

The reopening of the Strait of Hormuz has led to a surge in oil exports from the Middle East, but the market is far from stable. Crude prices have returned to pre-war levels around $73 a barrel, but the rapid increase in supply is creating a chaotic situation that may take months to settle.

Dozens of tankers stranded inside the Gulf during the war have rushed to leave in recent days, with US Energy Secretary Chris Wright stating that flows briefly exceeded pre-war levels of 20 million barrels per day. However, ship-tracking data suggests overall traffic remains far below the roughly 125 daily crossings seen before the conflict.

The influx of oil is running headlong into weak short-term demand, with refineries in Asia and Europe having largely secured their crude supplies for July and August. This has led to a potential surplus of around 5 million barrels per day next year, according to the International Energy Agency.