Trapped oil barrels expected to flood markets once Strait of Hormuz reopens on Friday

The Strait of Hormuz could reopen on Friday and release crude trapped across the Persian Gulf. Traders expect the extra supply to push Middle Eastern oil prices lower.

Gulf producers already increased exports this month through ship-to-ship transfers near the United Arab Emirates and Oman, pushing regional grades below benchmark prices on Tuesday.

The reopening follows an interim deal between the United States and Iran. Trump and Iranian President Masoud Pezeshkian digitally signed the 14-point agreement Wednesday.

Iran’s foreign ministry said it took effect immediately. Before the United States and Israel attacked Iran on February 28, Hormuz handled about one-fifth of global oil and liquefied natural gas shipments.

Reopening Hormuz sends trapped Gulf crude toward buyers worldwide

According to Kpler analyst Muyu Xu, about 93 million barrels of non-Iranian crude continue to be stranded in the Gulf region. Muyu believes that shipments of crude oil will continue to use less risky sea routes following the reopening of the strategic strait, while any barrels delayed due to such an approach will reach the market.

Kpler believes that roughly 72 million barrels of crude oil from Iran continue to accumulate in tanker ships west of Chabahar.

Such a quantity can only grow further if the US decides to relax restrictions on the sales of Iranian oil. Iran is also preparing to export its oil. As a result, three Iranian tankers have already traveled through Hormuz this week.

Vortexa provided another estimate according to satellite data obtained in mid-May. It showed 54 VLCCs in the Persian Gulf, carrying up to 87 million barrels of oil.

Most Asian refiners will not rush to buy every barrel, as many companies have already booked deliveries scheduled for June, July, and August. China also has several refinery shutdowns planned for maintenance, which cuts the need for extra crude in the near term.

Energy Aspects expects more than 1.8 million barrels per day of Chinese refining capacity to close for maintenance in July, while private refiners account for 1.2 million barrels per day of that total.

China’s processing rate fell near a four-year low in May and could drop to about 12.4 million barrels per day this month, whereas output could rise above 13 million barrels per day in July as state-owned refiners run more units.

Asian refiners reducing spot purchases due to constraints in maintenance

Several Chinese refiners stopped buying spot cargoes this week while waiting for the Hormuz reopening and the terms of the agreement.

Cheaper oil has reduced losses and improved refinery margins. Fuel use remains soft, however, as electric vehicles take a larger share of China’s transport market.

A larger flow of Gulf crude could reduce Asian demand for barrels from the Americas. Taiwan’s state refiner CPC said it can take heavier crude with more sulfur once Hormuz reopens. CPC would use those grades to make more bitumen and sulfur for the local market.

Middle Eastern suppliers have asked Indian refiners to take volumes already covered by long-term contracts. Doing that would leave less room for purchases through spot tenders. Kpler expects India’s demand for Gulf oil to recover slowly and add about 400,000 to 600,000 barrels per day of Middle Eastern imports through August as refiners adjust their crude mix.

Kpler estimated Monday that 118 tankers were trapped in the Persian Gulf, and the queue would need 10 to 15 days to clear. They warned that the first surge in crossings would come from ships finally leaving the backlog, not from a lasting rise in daily capacity.

The oil tankers and LNG ships are anticipated to be prioritized due to the need for their cargo by global energy customers. Container and commercial ships may have to wait longer.

Goldman Sachs (NYSE: GS) decreased its projections for oil after the US President made the decision. It decreased the price of Brent per barrel in Q4 of 2026 from $90 to $80.

The 2027 average projection was decreased to $75, but Goldman believes that oil shipments might resume earlier than anticipated, estimating daily flows at 11 million barrels per day due to increased traffic through the Hormuz Straits.

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