Crude oil prices are crashing on reports that flows out of the Strait of Hormuz are recovering, and analysts are back to predicting oversupply, even though Iran just said it will not be meeting with the U.S. envoys to negotiate peace, and that comes after strikes on a couple of ships in Hormuz.“The Strait is reopening faster than expected, yet the ‘twin solvers’ of high US exports and low Chinese imports remain in place,” Morgan Stanley commodity analysts wrote this week in a note, as quoted by Bloomberg. “As attention turns to 2027, the market has come full circle – back to surplus.”Earlier, Goldman Sachs analysts made a similar point, saying that tanker traffic via the Strait of Hormuz was recovering fast, noting that “You actually get a discount to buy a barrel now versus a barrel tomorrow because of the weakness in the Asian pull on Middle Eastern grades.”There is, however, a small detail that glut-seeing analysts either ignore or consider irrelevant. The tankers that were leaving the Strait in droves after the United States and Iran agreed on a ceasefire until August—which both sides appear to have broken—were tankers that had spent the last three months stuck there. They were not vessels that had arrived to load crude from Middle East ports. One reason for this is that alternative routes that some producing countries deployed during the war are working well: Saudi Arabia is exporting from its Red Sea port of Yanbu, the UAE is using a pipeline to Fujairah, and Iraq is planning to boost flows to Turkey. Yet speaking of Iraq, OPEC’s latest production data shows that the group’s number-two produced 1.76 million barrels of crude last month. This was an improvement on April’s average of 1.49 million barrels daily but still much less than the last pre-war month, when the country pumped over 4 million barrels of crude daily.Production slumps resulting from the war are why it is probably a bit too early to talk about a glut. Iraq could certainly restore its production to pre-war levels, but it will take more than a couple of days. The same goes for all other Gulf producers that were forced to shut in wells for lack of enough storage capacity, while tankers could not pass the Strait of Hormuz. Wells take time to resume production.There is also the issue of insurance. Insurers were not happy about the war at all. Indeed, they were so unhappy that they suspended coverage for vessels traversing the Strait, sparking outrage in U.S. political circles. The insurance industry is notoriously cautious about the possibility of losing any amount of money, so it is in no rush to cover tankers whose owners are eager to return to the Persian Gulf and start loading crude. There do not seem to be many of these, by the way.“Shipping costs are incredibly high right now, and you still can’t find enough shippers willing to go back out in there,” Energy Aspects’ Amrita Sen told CNBC this week, noting that shipping conditions for the Persian Gulf remain very different from what they were before the U.S. and Israel struck Iran on February 28.ING’s commodity analysts agree that the situation is far from a glut. “Tanker vessel movements in the Strait of Hormuz still appear limited. Total tanker crossings, which include both inbound and outbound movements, are estimated at around 11 on Tuesday, down from a peak of 24 last Wednesday,” Warren Patterson and Ewa Manthey wrote. They added, however, that “there has been a slight pickup in inbound tanker traffic, suggesting that shipowners are becoming increasingly confident about moving vessels into the Persian Gulf. If this trend accelerates, it becomes a clear headwind—and potentially a direct challenge—to our view that oil prices should rise from current levels.”The thing is that there is no certainty whatsoever if this trend—or any other—would accelerate. As media coverage of the situation swings wildly from peace talks to fresh strikes, usually depending on the time of the week, uncertainty for the future of Middle Eastern oil supply remains high. Meanwhile, the U.S. hit an all-time high in its own oil production, topping 13.9 million barrels daily. This was, in fact, the biggest reason for the renewed glut talk.Once again, there is a detail. The United States is certainly the biggest oil—and gas—producer in the world. However, it cannot single-handedly cover the supply gap left in the Middle East by the war between the U.S. and Israel, and Iran, not only due to physical constraints but also to the fact that most U.S. oil is light and sweet, while most of the world’s refineries, including U.S. ones, require other crude grades as well. As usual, it’s all a bit more complicated than the headlines suggest. Maybe analysts would do better to wait and make sure Hormuz tanker traffic has returned to pre-war levels before predicting a glut.By Irina Slav for Oilprice.comMore Top Reads From Oilprice.comJapanese Banks Commit $496 Million to India's Power Grid ExpansionIndia Fast-Tracks State Company Stake Sales to Cover Oil Shock CostsNigeria's NNPC Revenue Drops in May Despite Higher Oil Output