Oil drops below prewar prices on Saudi supply rebound

“A wave of oil is about to enter the market,” said Natasha Kaneva, head of commodities research at JPMorgan Chase & Co. (Elke Scholiers/Getty Images via Bloomberg)

Oil deepened its slide below prewar levels as Saudi Arabia ramped up crude exports toward normal rates, extending the recovery in flows from the Persian Gulf and heightening the prospect of a supply surplus.

Brent futures slipped to near $70 a barrel in London, hitting their lowest since the week before the Iran war began on Feb. 28. Saudi Arabia managed to load crude at almost 90% of previous levels after restarting shipments late last week from its giant Ras Tanura terminal, according to vessel-tracking data compiled by Bloomberg. U.S. benchmark West Texas Intermediate dipped to near $67 a barrel.

The kingdom’s rebound resembles that of its neighbor, the United Arab Emirates, which last month restored its oil exports to pre-conflict levels of more than 3.9 million barrels a day. A U.S. official estimates that oil supply through the Strait of Hormuz choke point has now reached more than 10 million barrels a day.

The result has been a gush of oil into the market at a time when many of the wartime supply workarounds are still in place — including releases of emergency reserves and depressed imports by China. Brent futures are trading in a bearish contango price structure that signals short-term oversupply, with discounts on the closest contracts. Premiums for physical crude have also plunged in recent days.

“A wave of oil is about to enter the market,” said Natasha Kaneva, head of commodities research at JPMorgan Chase & Co. “And here lies the paradox. The surge in oil supply is about to collide with a market that, at least for now, simply does not need it.”

Saudi Arabia has made the unusual move of selling millions of barrels on an ad hoc basis to customers in Asia as it starts shipping its crude from inside the Persian Gulf again.

Brent futures have continued to decline after their biggest quarterly drop since the pandemic in 2020, with a loss of more than 40% from their peak at the height of the war. Flows through Hormuz — which connects Persian Gulf producers to global buyers — continued despite tensions over the weekend, allaying fears of an oil-led inflationary spike.

“The market is currently being flooded with crude oil,” said Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. “Ample volumes of oil are putting pressure on the front end.”

Qatar said the next set of indirect talks between the U.S. and Iran would be scheduled at the earliest possible time following the funeral processions for Iran’s former supreme leader Ali Khamenei, who was killed in an airstrike at the start of the conflict. Ceremonies are expected to begin July 4 and continue for days, according to Iranian state-run media.

Ahead of the Qatar talks, Iran reiterated its determination to control shipping through Hormuz, one of several sticking points that include the Islamic republic’s nuclear program and fighting in Lebanon. U.S. President Donald Trump repeated that Iran cannot have a nuclear weapon in comments July 1 to reporters in Virginia.

How quickly the immediate supply glut dissipates will depend on a rebound in buying from China and the pace at which other governments choose to replenish depleted inventories, JPMorgan said. Total U.S. stockpiles have fallen to the lowest level since March 2025, with inventories excluding strategic reserves at around 1.2 billion barrels after 12 straight weeks of declines.