On June 23, international oil prices remained under pressure. As of the time of writing, both Brent crude and WTI crude saw a slight decline, following the significant drop in the previous trading day. The market focus shifted from the Middle East military risks to the actual supply changes after the US-Iran interim arrangement. According to Reuters, two oil tankers carrying a total of just under 2 million barrels of crude oil passed through the Strait of Hormuz on Monday, indicating that traffic in this key waterway is returning to normal. For the oil market, whether ships can pass through and whether Iran can sell oil have a more direct impact on short-term prices than diplomatic statements.

Oil Prices React to "Straits Are Open" Trade

The immediate trigger for this round of oil price decline was the resumption of traffic through the Strait of Hormuz.

The Strait of Hormuz is one of the world's most critical oil shipping channels. During the previous tension, the market was concerned that shipping interruptions would quickly affect Middle East oil exports, and this supply risk was factored into the prices. Now, with two oil tankers passing through the strait, traders have received a clearer signal: at least some crude oil transportation is returning to normal.

This is why despite a 4% drop in the previous trading day, oil prices on June 23 did not show a significant rebound. In intraday trading, Brent remained around $77 per barrel, while WTI fluctuated around $74 per barrel. The market is pricing in the fact that the "worst-case scenario has not happened yet."

However, oil prices have only fallen and have not fully returned to the calm state before the conflict. The resumption of traffic through the strait can reduce short-term panic but cannot eliminate the possibility of agreement breakdown, renewed shipping disruptions, or changes in sanction arrangements. For the crude oil market, the current situation is more like a cooling of the supply interruption risk rather than a resolution of Middle East risks.

60-Day Window Allows Temporary Easing of Iran's Oil Sales

Another clue putting pressure on oil prices is that the US-Iran interim arrangement has left a window for Iran to sell oil.

According to the contents of the US-Iran MOU disclosed by Axios, the arrangement includes a 60-day nuclear negotiation window and allows Iran to sell oil within 60 days. Reuters, citing a senior US official, reported that Iran can start selling oil and fuel immediately after the agreement is signed.

This has a direct impact on the global oil market. Previously, the market was concerned about two things happening at the same time: the disruption of the Strait of Hormuz and the ongoing supply constraints in Iran. If the strait is reopened and Iran's oil sales are temporarily relaxed, the most tense supply situation will be delayed.

However, the "60 days" itself is also a condition. It indicates that the current arrangement is still a negotiation window, not a final agreement. If Washington and Tehran fail to make progress towards a more stable arrangement within the window, after the expiration of waivers or temporary permits, Iran's exports, sanctions enforcement, and shipping security may once again affect oil prices.

Therefore, the market remains cautious about the continued downward pressure on oil prices. Short-term oil sales windows can alleviate panic, but they cannot guarantee a long-term recovery in Iranian exports, nor can they ensure the continued smooth operation of the Strait of Hormuz.

Political Developments Could Still Disrupt the Decline in Oil Prices

The current volatility in oil prices still heavily depends on political developments.

The US-Iran interim arrangement has improved short-term sentiment, but mutual trust between the two sides is not solid. Documents revealed by Axios and reports from Reuters indicate that the core of the agreement is still to buy time for subsequent nuclear negotiations. In other words, the current outcome is closer to "let the oil flow first" rather than resolving the long-standing disputes between the US and Iran.

Previous tough statements regarding the Strait of Hormuz have already shown the market's sensitivity to this risk. As long as new military threats, shipping restrictions, or signs of stalled negotiations emerge, crude oil prices could reintroduce a risk premium. For traders, the most important thing right now is not how optimistic the statements are, but whether tanker traffic and Iranian sales can be consistently maintained.

This also explains the contradictory performance of oil prices: signals of easing on the supply side lead to a decline in prices; however, the decline has not completely erased the previous gains because the interim arrangement has not yet turned into a long-term assurance.

Low SPR Levels Limit US Emergency Cushion

While oil prices are falling, the US strategic petroleum reserve remains at multi-year lows.

Citing data from the US Energy Information Administration, public reports state that as of the week ending June 12, the US strategic petroleum reserve was approximately 340 million barrels, its lowest level since 1983. This number is not the main cause of this round of oil price declines, but it sets a risk boundary for the market: if the Strait of Hormuz is disrupted again, negotiations break down, or commercial inventories decline simultaneously, the strategic cushion that the US can utilize is thinner than in the past.

A Reuters survey also shows that markets expect US crude, distillate, and gasoline inventories to have declined last week. If subsequent inventory data confirms the decline, the downward pressure on oil prices may be limited, especially in a scenario where Middle East risks have not been completely eliminated.

The most prominent short-term logic in the oil market at the moment is that the resumption of the Hormuz Strait passage and Iran's oil sales window have alleviated supply concerns. However, the 60-day negotiation period, lack of trust between the US and Iran, and the low level of US strategic reserves make it difficult for the market to interpret this round of oil price decline as a complete risk clearance. As long as any disruption reappears on either the shipping or negotiation front, oil prices may still react quickly.

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