Oil falls as navigation improves in the Strait of Hormuz
The price of a barrel of Kuwaiti crude oil fell by 95 cents to $74.65 per barrel in Friday trading, down from $75.60 per barrel in last Thursday’s trading, according to the price announced by the Kuwait Petroleum Corporation.
In global markets, oil prices fell at settlement on Friday following the latest round of clashes between the United States and Iran, amid trader optimism about the resumption of navigation in the Strait of Hormuz. However, prices ended the session with sharp weekly gains.
Phil Flynn, an analyst at Price Futures Group, said in a note: “It is surprising that oil prices have declined after rising to nearly $76 per barrel, even though the Strait of Hormuz has effectively been closed again. This is primarily due to confidence that U.S. military strength will prevent a prolonged closure of the strait.”
Prices gave up some gains after a Reuters report stated that Qatari mediators were meeting with Iranian officials in an attempt to ease tensions and create conditions for broader negotiations.
Iranian media reported several explosions in areas of southern Iran, including Bushehr, which houses a nuclear power plant.
The International Energy Agency said the latest escalation in confrontations between the United States and Iran could undermine its forecast of a large oil market surplus next year. The resumption of fighting delayed the full reopening of the Strait of Hormuz, through which about 20 percent of global daily oil and gas supplies passed before the war began on February 28. Giovanni Stonavo, an analyst at UBS, said that the absence of U.S. nighttime strikes on Iran might reduce oil prices, but declining flows through the strait limit downward pressure.
Daniel Hynes, senior commodities analyst at ANZ, said: “Despite the U.S. escalation of attacks on military sites in Iran, the market found some reassurance from the Trump administration’s decision to avoid targeting Iran’s energy infrastructure.”
In a separate development, the International Energy Agency on Friday lowered its forecast for Russian oil production due to Ukrainian attacks on the country’s energy infrastructure.
Two industry sources and Reuters calculations indicated that Russian gasoline production had fallen to a level equivalent to only about 65 percent of seasonal average consumption, after Ukrainian drone attacks halted operations at major oil refineries.
