Brent crude slipped on Friday, though the benchmark still posted a hefty weekly gain as traders remained on edge over the Iran conflict and threats from Houthi rebels directed at Saudi Arabia. The global crude benchmark fell 2.8% for the session, yet the weekly advance remained its strongest since July, with no clear end in sight for the Middle East turmoil.
Over the past two weeks, escalating hostilities across the region, coupled with a recent uptick in crude purchases, have tightened global market supply. The violence prompted Saudi Arabia to proactively shut a critical east-west pipeline, raising fresh concerns about the fragility of alternative transport routes that have become vital lifelines for oil shipments as vessels are unable to traverse the Strait of Hormuz. Earlier this week, Iran-backed Houthi forces advanced toward coastal areas adjacent to the strategically important Bab el-Mandeb strait.
“Most traders believe the damage to the east-west pipeline is manageable and likely to be repaired quickly,” said Dennis Kissler, senior vice president of trading at BOK Financial Securities Inc. Even so, he noted, the incident casts doubt on the reliability of the alternative routes that have kept oil moving through the Hormuz corridor over the past several months.
The International Energy Agency warned Friday that disruptions to global oil supply are now forcing consumption lower. The agency said that due to rising fuel costs and shrinking availability, this year's slump in global oil demand is set to be the steepest since the pandemic era.
Some crude exports continue to move via the Strait of Hormuz, with tankers frequently switching off transponders to evade detection, yet vessels still face persistent attack risks. The UK Maritime Trade Operations office reported Thursday that two ships were struck by unidentified projectiles west of Sohar in the Sea of Oman, underscoring the ongoing perils facing shipping lanes.
Iran announced plans to hold talks on Monday with Persian Gulf nations to address regional matters, as well as the results of negotiations with Oman regarding safe passage routes through the Strait of Hormuz. “As before, caution is warranted regarding any news of a potential deal. At this stage, Iran is unlikely to abandon its earlier demands, such as seeking control over the strait,” said Ryan McKay, senior commodity strategist at TD Securities.
Brent November futures settled 2.8% lower at $104.61 per barrel, while the contract still gained 8.7% on the week. WTI October futures dropped 2.4% to settle at $100.05 per barrel.
Comments