Oil Prices Edge Higher Despite Saudi Price Cuts, Hormuz Traffic Recovers

Oil prices posted modest gains early Tuesday, with West Texas Intermediate (WTI) crude trading at $69.14 per barrel, up 0.86%, according to live price data. Brent crude rose 1.06% to $72.75. The price for Bakken crude at the wellhead was discounted by $3.42 per barrel versus WTI. Natural gas held steady at $3.25.

The slight upward move comes despite significant downward pressure from major Middle East producers. According to OilPrice.com, Gulf oil exporters, led by Saudi Arabia, are slashing prices in a race to entice buyers. Saudi Arabia cut its official selling price for Asian buyers by as much as $11 per barrel, with its flagship Arab Light crude now trading at a $1.50 discount to the Dubai/Oman average.

Analysts cited weak Asian demand, particularly from China, and the return of temporarily unsanctioned Iranian crude to the market as key factors shifting power to buyers. "Weak Asian demand... together with the sanctions waiver on Iranian crude, has intensified competition among sellers and shifted the market in buyers' favour," Vortexa analyst Emma Li told OilPrice.com. The report notes that Iranian exports have increased and their discounts to benchmarks have narrowed since a U.S.-Iran memorandum of understanding was signed in mid-June.

Offsetting some of this bearish supply news is a tentative recovery in traffic through the critical Strait of Hormuz. A separate OilPrice.com report states that two fully-loaded Very Large Crude Carriers (VLCCs) carrying 4 million barrels of Saudi crude are heading for the strait, bound for Japan. This follows the exit of 12 million barrels on six tankers on Monday. However, commercial traffic remains at roughly one-third of its pre-war level of 84 daily transits, and reports indicate some vessels continue to make unexplained U-turns after warnings from Iran's Islamic Revolutionary Guard