Guotai Junan Futures: The resumption of flights indicates that risk premiums have largely been cleared, and short-term oil prices still face downward pressure.

In the early hours of Monday, the memorandum of understanding for the US-Iran agreement was officially signed, and the market continued to trade on expectations of the Strait of Hormuz reopening. Our view is that once the reopening is in place, the risk premium will largely be cleared. In the short term, oil prices still face downward pressure as they search for a bottom, but in the medium term, the outlook is more tilted toward “fall first, then rise.”

The agreement is essentially a phased framework arrangement and does not resolve core contradictions such as the nuclear issue and control of the strait; the long-term US-Iran game of checks and balances remains unchanged.

From the supply side, this week the market has discussed in greater depth the passage through the “Ais Strait” plus the Oman Gulf STS transfer and transshipment method, which helps boost the recovery speed of Middle Eastern exports. Overall, the crude oil export shortfall has narrowed from about 8 million barrels per day in the post-war period to 6.5 million barrels per day. However, the market has priced in the “reopening” fairly thoroughly, while still underestimating the “speed of supply recovery.”

Our estimates suggest that even under an optimistic scenario, export recovery still requires 1–2 months, and upstream production recovery would take more than 3 months. Reopening of the strait does not equal completion of supply recovery. In the short term, the release of floating stocks and onshore inventories will weigh on front-month prices, but in the third quarter the market is still likely to remain in a tight drawdown balance. Therefore, we maintain our Brent view for the third quarter of $85–90, and strategically place greater focus on dip-buying opportunities in the longer term and after the third quarter.

The core logic is this: after the risk premium is cleared, the market will gradually price in that supply recovery is slower than expected. (Guotai Junan Futures)