Oil falls on Hormuz talks
- Brent futures were down $1.42, or 1.56%, at $89.32 a barrel
Oil prices dipped despite escalating Middle East tensions and the spreading US-Iran war, as tankers continued to navigate the region and alternative shipping routes were explored.
- Escalating US-Iran war and regional stability.
- Alternative oil shipping routes and their impact.
- Threats to Red Sea and Bab el-Mandeb shipping.
Oil prices fell on Thursday, as investors weighed talks between Oman and Iran over the Strait of Hormuz even as Washington and Tehran traded strikes on each other’s military targets again.
Brent futures were down $1.42, or 1.56%, at $89.32 a barrel at 1324 GMT after touching a high of $93.31.
U.S. West Texas Intermediate (WTI) crude futures were down $1.14, or 1.35%, at $83.32, after hitting a high of $85.94.
“The fact that Oman is in talks with Iran could suggest that progress is being made on re-opening the Strait of Hormuz,” said Hamad Hussain, a climate and commodities economist at Capital Economics.
Iran-Oman talks on management of the strait continue, according to the Iranian Labour News Agency.
The U.S. military said it had hit dozens of Islamic Revolutionary Guard Corps targets in Iran in an operation launched after Tehran fired ballistic missiles at U.S. forces in the Middle East.
A drone caused the fire that engulfed two gas vessels at Egypt’s Mediterranean port of Damietta, the Egyptian cabinet said on Thursday, confirming that the blaze which erupted a day earlier was the result of an attack rather than an accident.
“Until safe passage through the Strait of Hormuz is no longer a gamble, the risk premium in oil is not going anywhere — hope for diplomacy is welcome, but the market is pricing in the reality of ongoing strikes,” said Tim Waterer, chief market analyst at KCM Trade.
The Strait of Hormuz, which normally handles around a fifth of global oil and liquefied natural gas flows, has remained a focal point for oil markets since the Iran war began on February 28.
Analysts said investor focus was on the volume of oil exiting key chokepoints, including Hormuz and the Bab el-Mandeb strait at the southern tip of the Red Sea, and the possibility of a diplomatic breakthrough.
In another blow to supply, tankers planned for loading at the Caspian Pipeline Consortium (CPC) terminal are heading away from the Black Sea after a vessel was hit during loading at the terminal on Thursday, two sources said and shipping data showed.
A Ukrainian drone attack caused a fire at Lukoil’s Perm refinery that damaged and forced the shutdown of one of its crude distillation units (CDU), two industry sources told Reuters.
“Given the disruption to flows through several maritime chokepoints, as well as the rapid depletion of oil inventories, prices could feasibly be even higher than where they sit currently,” Hussain from Capital Economics added.
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