Oil prices declined by over $1 in early trading on Thursday as investors assessed the potential supply risks stemming from attacks on shipping routes through the Strait of Hormuz, juxtaposed with US initiatives aimed at reducing petroleum shipping costs by relaxing sanctions on vessels. Brent crude futures declined by $1.39, representing a decrease of 1.31%, settling at $104.67 a barrel by 0116. Meanwhile, US West Texas Intermediate crude futures decreased by $1.02, or 1.07%, to $94.07, reversing the gains observed in the prior session. WTI reached a three-week peak in the previous session following the Houthis’ assault on Saudi Aramco’s headquarters, coupled with Iran’s announcement of new strategies aimed at targeting vessels in the Strait of Hormuz, thereby sustaining elevated oil prices.
A container ship and a dry bulk carrier both sank near the strait in the past 24 hours after being struck by projectiles in separate incidents, according to maritime officials on Wednesday. Attacks in the vicinity of the waterway have escalated significantly in the last 10 days, with Iran asserting that it is intensifying its strikes as a countermeasure to the US blockade of its ports and the more stringent sanctions implemented last month. With the conflict in Iran disrupting shipping and causing freight costs to reach unprecedented levels, the Trump administration is contemplating the relaxation of sanctions on what are referred to as shadow fleet vessels. These vessels have been involved in the transportation of oil and petroleum products from nations such as Russia, Iran, and Venezuela, with the aim of alleviating price pressures, according to a US official on Wednesday.
The recent discussions focus on the possibility of the United States permitting “legal oil” to be transported on vessels that were previously subject to sanctions, according to a US official. Increased output from Russia and the Middle East has maintained a cap on prices. In September, Russia’s crude oil production increased by 65,000 barrels per day, reaching a total of 8.43 million bpd. However, this figure still reflects a decline of 870,000 bpd compared to the same period last year, according to the International Energy Agency’s report released on Wednesday. The IEA reported that crude oil exports from Middle East Gulf producers increased by 4.4 million bpd in September, reaching approximately 75% of prewar levels.
In the United States, crude oil and distillate inventories experienced a decline, whereas petrol stocks saw an increase last week, according to market sources on Wednesday, referencing data from the American Petroleum Institute. Crude stocks experienced a decline of 11.1 million barrels during the week concluding on October 9, according to sources. That was a significantly larger draw than analysts had anticipated. “Despite the sharp inventory draw, oil prices barely reacted. The failure to rise on bullish news suggests investors are cautious about chasing prices higher at current levels,” said Haitong Futures in a note on Thursday.
