Strait of Hormuz shipping traffic remains well below normal
July 1, 2026
The API reported U.S. crude oil inventories fell by 6.1 million barrels last week, while gasoline stocks declined by 2.1 million barrels. Distillate inventories increased by 2.9 million barrels.
The United States and Iran continue peace negotiations in Doha, but progress appears fragile. According to The Wall Street Journal, an internal power struggle in Tehran is complicating talks. Iranian civilian leaders are pushing for the release of billions of dollars in frozen assets, while hardline military officials are demanding greater control over the Strait of Hormuz.
According to Iranian sources, Tehran is seeking international recognition of its authority over the Strait of Hormuz, including the right to levy fees on vessels entering or leaving the Persian Gulf. That position conflicts with the U.S. interpretation of the interim memorandum of understanding signed on June 17 and could become a significant obstacle to reaching a lasting agreement. While few expected these negotiations to be easy, this issue highlights the challenges that remain.
Warren Patterson, head of commodities strategy at ING, believes the market has overcorrected to the downside. He noted that oil flows through the region are unlikely to return to pre-conflict levels until late in the third quarter, while current prices appear to assume a full recovery by the end of July.
Analysts at Ritterbusch & Associates cautioned that any renewed military activity following the memorandum of understanding would likely require a much larger geopolitical risk premium than is currently reflected in oil prices.
Estimates of tanker traffic through the Strait of Hormuz continue to vary widely, making it difficult to gauge the pace of recovery. ING estimated that about 11 vessels transited the strait on Tuesday, compared with roughly 24 a week earlier. Other analysts have reported significantly higher figures. Regardless of the estimate, shipping volumes remain well below normal.
Meanwhile, the U.S. Energy Information Administration reported domestic crude oil production reached a record 13.93 million barrels per day in April.
Oil prices are likely to remain rangebound in the near term as traders weigh record U.S. production against continued uncertainty surrounding the fragile ceasefire and ongoing negotiations between the United States and Iran.