The physical oil market is showing signs of recovery at the end of the week, with tankers continuing to move through the Strait of Hormuz despite ongoing regional tensions. Two Japanese-owned vessels transited the strait this week carrying significant volumes of Kuwaiti and Emirati crude.

Physical Market Rebound

After a brief slump earlier in the week, the physical oil market is firming again. Spot purchases by Asian refiners have lifted North Sea and West African crude premia, although values remain well below the levels seen in early to mid-April. Trading giant Vitol is offering Iraqi Basrah crude to customers, indicating that at least some cargoes are successfully exiting the Persian Gulf.

Brent crude is currently trading around $106 per barrel, significantly below the $129 level reached in 2022 after Russia’s invasion of Ukraine, and far from the $150-200 range some analysts had projected if regional conflict had escalated further.

Hormuz Traffic Continues

A second Japanese-owned tanker, the Eneos Endeavour, crossed the Strait of Hormuz with 2 million barrels of Kuwaiti and Emirati crude. The vessel sailed “dark” (AIS beacon switched off), so it is unclear whether it followed official Iranian shipping lanes.

The continued movement of tankers through the strait suggests the market is handling geopolitical risks more effectively than initially feared. Activity levels, however, remain below pre-April norms.

Bottom Line

The physical oil market is demonstrating relative resilience despite regional tensions. Asian refinery purchases and successful transits through Hormuz indicate that supply continues to flow, yet prices remain well below 2022 peaks. Analysts will be watching premia and flow data closely over the coming week to assess the market’s direction.