Oil prices are testing down to pre-war levels this morning as more tankers cross the Strait of Hormuz and signs of progress in US-Iran peace talks eased fears of an immediate supply crunch.

Vessels are transiting Hormuz with their satellite signals switched on, indicating growing confidence among shipowners about safe passage of the chokepoint, through which about a fifth of global oil supplies transited before the war. The International Maritime Organization also said it had received safety guarantees allowing hundreds of ships to exit the Persian Gulf.

Washington and Tehran have both flagged early progress in talks to end the war, although negotiations are likely to be protracted and claims from the two sides have diverged. In a sign of how much oil has been leaving Hormuz in recent weeks, the International Energy Agency estimates that the United Arab Emirates is exporting oil at nearly 85% of pre-war levels. 

API

• Crude -765k

• Cushing

• Gasoline -1.24mm

• Distillates +1.45mm

DOE

Crude stocks have now declined for 9 straight weeks (as have inventories at the crucial Cushing Hub)...

Cushing is now well and truly testing 'tank bottoms' with stocks at their lowest levels since 2014...

That is the lowest level for this time of year since 2004...

The SPR saw another dramatic drawdown (over 9mm barrels last week)...

US Crude production is back near record highs as rig counts keep rising...

WTI is holding near the lows of the day after the report...

Finally, a closely-watched oil market indicator flipped into a bearish structure on Wednesday for the first time since February, with Brent’s prompt time-spread trading in a shallow contango, with the nearest contract’s price below the next month’s. That structure typically signals expectations of oversupply.

There’s also been a collapse in prices for real-world barrels, with premiums for barrels from the North Sea to West Africa tumbling.