LONDON: Oil prices fell about 2% on Friday and were on track for steep weekly losses as supply eased with more oil tankers resuming transit through the Strait of Hormuz, despite a cargo vessel being struck near Oman on Thursday.
Brent crude futures dropped $1.47, or 1.95%, to $73.79 a barrel, while US West Texas Intermediate (WTI) crude fell $1.44, or 2%, to $70.48 a barrel.
“There is a general sell-off as the market reacts to the increased flows exiting the Strait of Hormuz and China not yet picking up crude demand,” said June Goh, senior oil market analyst at Sparta Commodities.
Both benchmarks had gained more than 2% on Thursday after a cargo ship was hit by an unidentified projectile near Oman, prompting the UN’s shipping agency to suspend its voluntary evacuation programme.
Market sentiment has improved amid increasing tanker traffic through the Strait of Hormuz and progress in negotiations between Washington and Tehran
Data released on Thursday showed crude shipments through the Strait of Hormuz climbed this week to their highest level since the US-Israel conflict with Iran began in February, after a ceasefire agreement reopened the strategic waterway. The reopening also eased concerns over prolonged disruptions to global oil supplies.
However, overall traffic remains well below the daily average of 125 vessels that transited the strait before the conflict began on February 28.
“Much of the increase reflects previously stranded vessels leaving the Persian Gulf. Vessel flows into the Gulf remain much more modest, suggesting that once stranded vessels have cleared, flows could decline again,” analysts at ING said in a note.
Venezuela earthquakes raises fresh concerns over oil supplies
Meanwhile, earthquakes in Venezuela raised fresh concerns over oil supplies. Initial assessments indicated limited damage to the country’s oil, gas and refining infrastructure, as most major production facilities, pipelines and export terminals are located away from the hardest-hit areas.
However, widespread power outages have raised questions over whether Venezuela can maintain crude production at its pre-earthquake level of nearly 1.2 million barrels per day, according to industry sources.
Earlier this month Tehran and Washington signed the Islamabad Memorandum of Understanding laying the groundwork for the negotiations, after a 40-day war that was followed by weeks of ceasefire.
The negotiators aim to tackle some of the most intractable issues that have dogged US-Iranian relations for decades, including Tehran’s nuclear programme and enriched uranium.
