Oil Prices Fall 2%, Head for Weekly Losses as Hormuz Supply Concerns Ease

NEW DELHI — Global crude oil prices fell about 2% on Friday and were on track for sharp weekly losses as concerns over supply disruptions through the Strait of Hormuz eased, despite renewed security risks following an attack on a cargo vessel near Oman.

Brent crude futures declined $1.47, or 1.95%, to $73.79 per barrel as of 0421 GMT, while U.S. West Texas Intermediate (WTI) crude dropped $1.44, or 2%, to $70.48 per barrel.

The declines put both benchmark contracts on course for weekly losses of around 8%, reversing gains recorded earlier in the week.

Increased Oil Flows Pressure Prices

Market sentiment weakened after more oil tankers resumed transiting the Strait of Hormuz, easing fears of prolonged supply disruptions following the recent ceasefire that reopened the strategic waterway.

Saudi Arabia’s state-owned oil producer, Saudi Aramco, also resumed crude loading operations at its Ras Tanura terminal on Friday after a nearly four-month suspension, according to shipping data from LSEG.

The data showed two Very Large Crude Carriers (VLCCs), each capable of transporting up to 2 million barrels of crude oil, loading cargo at the terminal, while another vessel was waiting offshore.

“There is a general selloff as the market reacts to the increased flows exiting the Strait of Hormuz and China not yet picking up crude demand,” said June Goh, Senior Oil Market Analyst at Sparta Commodities.

Shipping Security Risks Persist

Oil prices had climbed more than 2% on Thursday after a cargo vessel was struck by an unidentified projectile near Oman, prompting the United Nations’ shipping agency to suspend its voluntary evacuation programme for vessels operating in the region.

Two U.S. officials told Reuters that Iranian forces fired on the vessel as it attempted to transit the Strait of Hormuz.

Iranian authorities, however, warned that they could not guarantee the safety of ships navigating outside the designated Hormuz shipping routes.

Traffic Improves but Remains Below Normal

Industry data released on Thursday showed crude shipments through the Strait of Hormuz climbed this week to their highest level since the U.S.-Israeli conflict with Iran began in February.

The increase followed the implementation of a ceasefire agreement that allowed commercial shipping to resume through the strategic waterway.

However, overall vessel traffic remains significantly below pre-conflict levels, with ship movements still falling short of the average of 125 vessels that transited the strait daily before hostilities erupted on February 28.

Analysts at ING said much of the recent increase reflected previously stranded tankers leaving the Persian Gulf rather than a full recovery in inbound shipping activity.

“Much of the increase reflects previously stranded vessels leaving the Persian Gulf. Vessel flows into the Gulf remain much more modest. It suggests that once stranded vessels have moved out, we could see a pullback in flows,” the analysts said.

Venezuela Earthquakes Raise Fresh Supply Questions

Meanwhile, earthquakes that struck Venezuela on Thursday also raised fresh concerns about global oil supplies.

Preliminary assessments indicated limited physical damage to the country’s major oilfields, refineries, pipelines and export terminals, as most of the critical infrastructure is located far from the hardest-hit areas.

However, industry sources said widespread electricity outages have raised concerns over whether Venezuela can sustain crude production at its pre-earthquake level of nearly 1.2 million barrels per day.

The extent of any disruption remains under assessment as authorities continue evaluating the impact of the earthquakes on the country’s energy sector.

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A Lagos-based journalist with a passion for disseminating factual information and a deep appreciation for good music, good food, movies, and beautiful cars. He hopes to travel the world someday, documenting its beauty and diverse cultures through his storytelling.