Global Oil Prices Plummet: When Will Local Gas Prices Follow?

Following the agreement between the United States and Iran to open the Strait of Hormuz, the international crude oil market has suddenly shifted into a state of oversupply as shipments through the strait have surged.

International oil prices have fallen for four consecutive days, returning to levels seen before the conflict between the U.S. and Iran.

As of June 24, local time, Brent crude for August delivery dropped 4.33% to $73.74 per barrel.

West Texas Intermediate (WTI) also fell 3.92% to $70.34 per barrel.

Both benchmarks are at their lowest levels since February 27, the day before the U.S.-Iran conflict broke out.

This decline is driven by growing expectations that the resumption of passage through the Strait of Hormuz, following progress in U.S.-Iran negotiations, will release previously bottled-up oil supplies into the market.

Shipping data indicates that three oil tankers carrying 5 million barrels of crude have already cleared the Strait of Hormuz.

Prospects that Iranian oil sales will increase due to U.S. sanctions waivers have also eased supply concerns.

Furthermore, even before a tentative peace agreement was reached between the U.S. and Iran, several Middle Eastern countries, including the United Arab Emirates (UAE) and Kuwait, had been transporting oil with the assistance of the U.S. military.

Notably, the International Energy Agency (IEA) stated this week that the UAE's total oil exports reached 85% of pre-war levels by early June.

With the strait now open, companies that previously avoided the route have been busy moving their accumulated oil stockpiles.

The UAE, the most aggressive producer in the Middle East, sold 60 million barrels intended for supply over the coming months through a series of tenders, which significantly drove down Middle Eastern crude prices.

As a result, the Asian market has become oversupplied, causing Middle Eastern crude that would typically head to Asia to be diverted to Europe.

Nigeria's massive Dangote Refinery has also begun purchasing UAE crude for the first time in history, suggesting that Middle Eastern oil producers are offering oil at exceptionally discounted prices.

However, despite these trends in international oil prices, the average retail price of gasoline at domestic gas stations remains stubbornly high, making it difficult for consumers to feel the decline.

In response, the refining industry explained that there is typically a two- to three-week lag before fluctuations in international oil prices are reflected in domestic prices, as existing, more expensive oil inventories must be depleted first.

They added that consumers would likely begin to feel the effects of price cuts starting in July.

Reported by Jung Da-eun | Video by Ryu Ji-soo | Graphics by Yook Do-hyun | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.