The oil price rally has faded quickly, and ASX energy shares are being pulled lower with it.
At the time of writing, crude oil is down 1.71% to US$69.14 a barrel, while Brent crude is down 1.88% to US$72.35 a barrel.
That leaves crude oil below US$70 and Brent below US$73, with both benchmarks now moving back toward levels seen before the recent Middle East war.
It's a clear shift from earlier in the month, when traders were closely watching the Strait of Hormuz and pricing in the risk of supply disruptions.
Here's what has changed.
Image source: Getty Images
Oil prices fall as US-Iran talks continue
According to reports, tanker traffic through the Strait of Hormuz has improved after recent progress in US-Iran talks.
One report said 14 oil tankers crossed the maritime chokepoint on Tuesday, carrying about 20 million barrels of oil. That compares with roughly 12 tankers a day the previous week.
Trading Economics also noted that shipowners are becoming more confident moving through the area after safety guarantees from the International Maritime Organization.
The International Energy Agency (IEA) estimates the United Arab Emirates is exporting oil at nearly 85% of pre-war levels, selling roughly 60 million barrels from the Persian Gulf.
China demand is also being watched
The demand side is not helping oil prices either.
Oilprice.com reported that China's crude imports have fallen to their lowest level since 2018.
The report said China imported 7.82 million barrels per day in May. That was down 38% from February's pre-conflict level.
China is one of the world's biggest oil buyers, so that number is getting plenty of attention.
The same report said China has been relying more on physical cargoes already in storage, while cutting back purchases from major Middle East suppliers.
ASX energy shares slide
The latest developments have flowed through to ASX energy shares.
Woodside Energy Group Ltd (ASX: WDS) shares are trading 2.92% lower at $27.41. The ASX's biggest energy stock has now fallen almost 15% in a month.
Santos Ltd (ASX: STO) shares are also tumbling, down 2.69% to $7.04. The Santos share price has dropped 14.5% across the same period.
What investors are watching now
There was some supportive inventory data in the background.
According to the US Energy Information Administration, US crude inventories fell by 6.1 million barrels in the week ending 19 June.
Commercial crude stockpiles fell to 412.1 million barrels, which is around 7% below the 5-year average.
However, that wasn't enough to stop oil prices from falling today.
At the moment, the market appears more focused on easing Middle East supply concerns than lower US inventories.
