Oil prices fell on Friday as shipping flows through key Middle East chokepoints helped offset supply fears tied to the US-Iran war. Brent and WTI were both still set for monthly gains of about 20%.
Oil prices fell on Friday as continued tanker movements through key Middle East shipping lanes eased some supply fears, even though the wider market remained on course for a sharp monthly gain amid the US-Iran war.
Brent crude futures were down $1.03, or 1.2%, at $88 a barrel, while US West Texas Intermediate crude fell $1.50, or 1.8%, to $82.09 a barrel. Even with the daily decline, both benchmarks were set to finish the month about 20% higher.
Daniel Hynes, a senior commodity analyst at ANZ, said crude was drifting lower because heightened tensions in the Middle East were being countered by indications of stronger flows through the Strait of Hormuz. The waterway typically handles about a fifth of global shipments of crude oil and liquefied natural gas and has remained central to market concerns since it was largely blockaded following the February 28 start of the US-Israel war on Iran.
Traders are also watching other regional chokepoints. Saudi Arabia is seeking to head a coalition aimed at strengthening defence cooperation in the Bab El-Mandeb Strait, the Red Sea and the Gulf of Aden. The Saudi defence ministry said 14 countries, including Djibouti, Egypt, Pakistan, Sudan and Turkey, support the multinational maritime defence coalition.
Fresh pressure has also come from Yemen, where Iran-aligned Houthi militants last week announced a naval blockade on Saudi Arabia, threatening the Red Sea corridor used as an alternative route for the kingdom's oil exports.
Priyanka Sachdeva, an analyst at Phillip Nova, said tanker traffic was still moving through both the Strait of Hormuz and the Red Sea, but rising security threats had driven up freight charges and insurance premiums, leaving a sizeable geopolitical risk premium in oil. She said, "While prices eased from recent highs, the broader trend remains constructive."
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