From "shipping panic" to "surplus crisis": US-Iran agreement triggers oil price crash of 30%, Goldman Sachs warns of net crude surplus of nearly 2 million barrels next year

As the geopolitical tensions between the US and Iran substantively cool down, the global crude oil market is experiencing a sharp fundamental shift from "supply panic" to "oversupply crisis."

On Wednesday, international oil prices once again suffered a sell-off and plunge, with WTI crude and Brent crude futures both falling by over 1.70% at one point. Brent crude fell below the $73 mark, significantly retreating from the peak of over $126 during the wartime.

The direct driving force behind the heavy drop in oil prices is the rapid cooling of the Middle East geopolitical situation. A White House spokesperson clearly stated that the US and Iran have a great chance of reaching an agreement, and delegations from both sides held indirect talks in Doha on July 1, advancing issues such as unfreezing assets and ensuring maritime security in the strait.

Both Goldman Sachs and Morgan Stanley assert that the global oil market is about to return to a severe oversupply state. Even considering the huge demand for global replenishment of strategic petroleum reserves, the average daily net surplus of the crude oil market next year will still approach 2 million barrels, exerting long-term pressure on oil prices.

US-Iran Agreement Progresses, Geopolitical Premium Fully Reversed

The crude oil market is rapidly stripping away the war premium previously factored in.

According to Xinhua News Agency, sources revealed that the US and Iran held indirect talks on July 1 in the Qatari capital Doha, with Qatar and Pakistan acting as mediators. The talks focused on implementing the US-Iran memorandum of understanding, with core issues including unfreezing Iran's frozen assets and ensuring the maritime security of the Strait of Hormuz.

With the implementation of the temporary peace agreement between the US and Iran, shipping through the Strait of Hormuz, a vital waterway connecting the Persian Gulf to the global market, is recovering.

Although there have been two incidents of ships being attacked recently, the volume of vessel passages through the strait continues to increase. Meanwhile, Iran has reiterated its determination to manage maritime traffic in the channel and may take joint action with Oman.

Shipping Order to Be Restored, Wall Street Bears

The smooth flow of crude oil supply channels in the Middle East has directly triggered investment banks' concerns about market oversupply.

Samantha Dart, co-head of global commodities research at Goldman Sachs, said in an interview with Bloomberg TV that as the impact of the Iran war gradually fades and traffic through the Strait of Hormuz returns to normal, the oversupply situation in the global oil market will re-emerge.

Samantha Dart pointed out that exports through the Strait of Hormuz are expected to normalize by the end of July. Once the strait's flow recovers, the market will enter an oversupply scenario, with an expected average daily surplus of slightly more than 3 million barrels next year.

She added that because US energy exports and Chinese imports have remained stable, the market did not react sharply to the short-term "disruption" of the strait, indicating that the crude oil market is moving towards normalization.

Morgan Stanley's view is highly consistent with Goldman Sachs. The institution has lowered its oil price forecasts twice in just over two weeks.

Morgan Stanley analysts stated bluntly in their report this week that as the market's focus shifts to 2027, the crude oil market has returned to square one, once again facing oversupply.

Strategic Reserve Replenishment Cannot Offset Oversupply; Tolls Do Not Hinder Energy Costs

In the first few weeks of the conflict, the International Energy Agency (IEA) coordinated the release of a record 400 million barrels of emergency crude reserves to calm oil prices.

As part of that plan, the Trump administration tapped into the US Strategic Petroleum Reserve (SPR). Official data shows that US crude oil inventories fell from 415 million barrels at the end of February to 331 million barrels on June 19, the lowest level since 1983.

Although these depleted reserves now urgently need to be restocked, it will not be enough to reverse the oversupply pattern.

Samantha Dart estimates that the global demand to replenish strategic petroleum reserves is slightly higher than 1 million barrels per day. While this will tighten the market to some extent, it will only partially offset the expected surplus, and the market will ultimately face a net surplus of nearly 2 million barrels per day.

Regarding the market's concerns about future shipping costs in the Strait of Hormuz, Goldman Sachs believes its substantive impact on global energy prices is limited.

When asked about the proposal to levy tolls on ships, Samantha Dart said that shipping companies are currently most concerned about the certainty of regulatory rules.

Industry feedback shows that shipowners do not mind paying tolls, provided that the rules are clear to avoid violating US sanctions. According to unofficial standards previously discussed, the toll is about $1 per barrel.

Samantha Dart pointed out that this cost is essentially no different from the daily fluctuations in crude oil prices. From the attitude of shipping companies, it remains unclear whether this additional fee will significantly push up global energy costs, and it is highly likely that it will not have a fundamental impact on crude oil pricing.

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