Oil prices extended their steep decline this week as more Persian Gulf crude found its way back to market, easing the supply fears that had driven prices above $120 a barrel earlier this year. According to the U.S. Energy Information Administration, Middle East producers had cut output by more than 11 million barrels a day in May compared with pre-conflict levels — but that gap is now starting to close, and traders are selling on the expectation that the barrels are coming back.

The price action shows it. Brent crude, the international benchmark, settled at $71.57 a barrel Wednesday, down 1.9% on the day. West Texas Intermediate, the U.S. benchmark, fell to $68.58. Brent dropped roughly 21% over the past month, its worst monthly performance since March 2020, while WTI logged its steepest monthly decline since late 2021. WTI’s recent close below $70 was its first since February 27 — the day before the 2026 Iran war began.

The turning point was diplomatic. The United States and Iran struck a 14-point memorandum of understanding on June 17 to pause the fighting that had choked off the Strait of Hormuz, the narrow waterway between Oman and Iran that normally carries about a fifth of the world’s oil. As the shooting slowed, tankers that had been trapped or idling began moving again.

Saudi Arabia’s recovery is the one the market is watching most closely. Saudi Aramco is restarting crude loadings at Ras Tanura, its largest export terminal, which had sat largely idle since early March, according to vessel-tracking data showing very large crude carriers owned by Bahri moving toward the Ju’aymah loading area. That matters because reopening the strait and restarting the region’s biggest export machine are two different things.

The kingdom never fully stopped selling oil. Throughout the crisis, it rerouted around 4 million barrels a day through its East-West Pipeline to the Red Sea port of Yanbu, bypassing Hormuz entirely. Before the war, Saudi crude exports through the strait averaged about 6.3 million barrels a day in 2025 and climbed to roughly 7.1 million barrels a day in February 2026, according to figures from Argus and the Arab Center. Bringing Ras Tanura back toward those levels is the final piece of restoring full Saudi flows — and its return is a big reason prices keep softening.

Other producers are adding to the wave. Iran has said it has shipped more than 40 million barrels since the U.S. lifted its naval blockade, Iraq and Kuwait are moving to unwind wartime force-majeure declarations, and Russian exports have surged to record levels, leaving a growing pile of barrels floating at sea.

For businesses and households, cheaper crude is mostly welcome news. Lower oil feeds directly into lower gasoline and jet fuel prices, giving relief to drivers, airlines and shippers whose costs had spiked. The EIA had warned that U.S. wholesale gasoline prices could rise around 50% in 2026 if Hormuz stayed shut, so a faster supply recovery takes pressure off that forecast and off inflation more broadly.

The flip side is fiscal pain for the exporters. Every dollar off the oil price widens the budget gaps in Riyadh and across the Gulf, where governments spent the war years funding ambitious diversification plans. Analysts at Goldman Sachs have flagged war-swollen deficit estimates for Saudi Arabia well above what the kingdom had budgeted.

Not everyone agrees the slide runs much further. Haitham Al Ghais, secretary general of OPEC, told CNBC the group does not expect oil demand to peak in the foreseeable future and rejected forecasts pointing to a coming glut, saying OPEC focuses on actual numbers rather than projections. Strategists Warren Patterson and Ewa Manthey at ING said tanker traffic into the Gulf is picking up as shipowners grow more confident, a trend they called a clear headwind to any rebound in prices.

The wildcard remains the same one that has driven the market all year: whether the fragile U.S.-Iran truce holds. A durable deal keeps the barrels flowing and prices heading lower. Any fresh flare-up in the strait could reverse the slide in a matter of hours. For now, with real cargoes lining up at Saudi loading buoys, the market is betting the worst of the supply shock is over.

JBizNews Desk | New York
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