Oil prices fell further on Friday, slipping by nearly 4 per cent, and are heading for another sharp weekly decline amid easing supply worries, despite an attack on Thursday on a vessel in the Gulf of Oman.
Brent, the benchmark for two thirds of the world's oil, was down 3.69 per cent to $72.48 a barrel at 1.13pm UAE time. West Texas Intermediate, the gauge that tracks US crude, declined 3.66 per cent to $69.29 per barrel.
From last week's close, Brent and WTI are down by nearly 10 per cent and 8.5 per cent, respectively.
"With shipping traffic steadily improving through the Strait of Hormuz, traders are increasingly focused on a growing queue of cargoes waiting to move," said Ole Hansen, head of commodity strategy at Saxo Bank. "Millions of barrels are already loaded on tankers that were unable to leave the Gulf during the disruption, while hundreds of additional vessels remain positioned outside the region waiting to load. The result is a potential surge of supply entering the market at a time when buyers are showing signs of caution."
Crude prices have been declining steadily during peace negotiations between the US and Iran, and a fragile truce between Israel and Hezbollah in Lebanon. Washington and Tehran are working to strike a deal within 60 days, under the terms of an initial agreement.
More ships are now able to transit the strait, through which about a fifth of the world's oil and gas normally flows. But on Thursday, a cargo vessel was struck by a projectile off the coast of Oman, causing damage to its bridge but there were no casualties, the UK Maritime Trade Operations said.
The incident led to an immediate increase in oil prices, although the gains were later erased.
"Most of the increase in flows from the Gulf is outbound – ships exiting the strait. However, a significant increase in inbound flows requires shipping confidence to return, including safety assurances and mine clearance to allow insurance premiums to normalise," said Giovanni Staunovo, a strategist at Swiss bank UBS.
"Considering how slowly tankers move – basically at the pace of a fast bike – it will take a while for them to reach their loading facilities. Another challenge is that some of the tankers waiting outside the Gulf were diverted to other regions to pick up crude and refined products, so they would first need to unload their cargo before moving back to the Gulf."
On Friday, Saudi Aramco resumed oil loading operations at its Ras Tanura terminal in the Gulf after an almost four-month halt, shipping data from LSEG showed. Meanwhile, oil exports from the UAE in early June recovered to reach nearly 85 per cent of prewar levels, as the country used alternative shipping routes and pipelines, the International Energy Agency said this week.
Adding to the easing of energy supplies globally are also record exports by the US that have kept Asian and European markets better stocked, and the release of strategic reserves in Organisation for Economic Co-operation and Development countries.
