Crude oil prices steadied on Wednesday after falling sharply in the previous two trading sessions, as investors assessed diplomatic efforts to end the US-Iran war and restore shipping traffic through the Strait of Hormuz.
Brent crude futures rose 26 cents, or about 0.33 per cent, to USD 79.62 a barrel by 0110 GMT. US West Texas Intermediate (WTI) crude futures gained 12 cents, or 0.16 per cent, to USD 75.90 a barrel.
The modest recovery came after oil prices declined significantly earlier in the week amid hopes that a diplomatic arrangement between the United States and Iran could ease tensions in the Middle East and improve the flow of crude and liquefied natural gas through the Strait of Hormuz.
Oil prices fall as hopes of US-Iran deal grow
Oil prices came under pressure after Qatar said on Tuesday that mediators were making progress in efforts to end the war.
The comments raised expectations that an agreement could be reached and that shipping activity through the Strait of Hormuz could gradually return to normal.
Brent crude closed below USD 80 a barrel on Tuesday for the first time since July 13. The benchmark had fallen more than 5 per cent on Tuesday, extending Monday’s sharp decline.
However, Iran has denied US President Donald Trump’s assertion that talks between Washington and Tehran are already under way.
Trump and Qatar’s Emir Sheikh Tamim bin Hamad Al Thani discussed efforts to narrow differences between the US and Iran and improve the prospects of a lasting settlement during a phone call on Tuesday, according to Qatar’s Emir’s office.
For oil markets, the progress of these diplomatic efforts remains important because the Strait of Hormuz is a key route for global energy supplies.
Strait of Hormuz remains a key concern
Before the war began, around 20 per cent of the world’s oil and liquefied natural gas moved through the Strait of Hormuz. The waterway has remained a major source of uncertainty for oil traders as the conflict has disrupted shipping activity.
A US official has said temporary shipping routes through the Strait of Hormuz would not require permits, approvals or fees. The official, quoted by Al Jazeera, said no single party controls navigation through the strategic waterway or has the ability to prevent vessels from transiting through it.
However, Iranian officials have continued to challenge US statements regarding the reopening of the strait.
The uncertainty means that the oil market remains highly sensitive to developments in the region. Any sustained improvement in shipping activity could reduce concerns over supply disruptions and put further pressure on crude prices.
Hormuz vessel traffic remains subdued
Despite renewed diplomatic efforts, vessel traffic through the Strait of Hormuz has remained weak. According to an S&P Global report, only 17 vessel crossings were recorded through the strait on August 2, compared with 15 on August 1 and 17 on July 31.
A total of 848 vessel transits were recorded through the Strait of Hormuz in July, averaging 27 crossings a day. However, traffic slowed considerably during the second half of the month, with daily crossings averaging 17.
July traffic was lower than the 917 transits recorded in June, which was the highest monthly volume since the beginning of the conflict. The report also said Iran-linked vessels accounted for 53 per cent of total traffic in July, up from an average of 42 per cent in June.
Iraqi crude shipments also decline
The disruption in shipping has also affected crude flows. According to S&P Global Commodities at Sea data, 10 crude tankers carrying Iraqi crude successfully exited the Strait of Hormuz during July. These vessels transported around 648,000 barrels per day, down 27 per cent from 883,000 barrels per day in June.
The decline highlights the impact of lower vessel traffic on physical oil flows, even as crude prices have recently fallen on expectations of a possible diplomatic breakthrough.
Traffic through the US naval blockade remained largely stable. An average of 41 vessels per day crossed the blockade in the week ending August 2, slightly lower than 46 vessels per day in the previous week.
What next for crude oil prices?
For now, oil prices are likely to remain driven by developments surrounding the US-Iran conflict and the Strait of Hormuz. A sustained ceasefire or agreement between Washington and Tehran could lead to a further recovery in shipping activity. This would ease concerns about supply disruptions and could keep crude prices under pressure.
At the same time, continued security incidents or a prolonged disruption to the Strait of Hormuz could quickly revive concerns over global oil supplies.
The Bab el-Mandeb Strait is also being closely watched. S&P Global said traffic through the waterway totalled 1,298 transits in July, averaging 42 crossings a day, broadly unchanged from June. However, northbound traffic weakened sharply in recent days, with only 10 vessels recorded on August 2.
For oil traders, therefore, the key question is whether diplomatic progress translates into an actual improvement in shipping activity. Until there is greater clarity on the situation, crude prices are likely to remain sensitive to every development around the US-Iran conflict and the two critical shipping routes.
Crude oil prices steadied on Wednesday after falling sharply in the previous two trading sessions, as investors assessed diplomatic efforts to end the US-Iran war and restore shipping traffic through the Strait of Hormuz.
Brent crude futures rose 26 cents, or about 0.33 per cent, to USD 79.62 a barrel by 0110 GMT. US West Texas Intermediate (WTI) crude futures gained 12 cents, or 0.16 per cent, to USD 75.90 a barrel.
The modest recovery came after oil prices declined significantly earlier in the week amid hopes that a diplomatic arrangement between the United States and Iran could ease tensions in the Middle East and improve the flow of crude and liquefied natural gas through the Strait of Hormuz.
Oil prices fall as hopes of US-Iran deal grow
Oil prices came under pressure after Qatar said on Tuesday that mediators were making progress in efforts to end the war. The comments raised expectations that an agreement could be reached and that shipping activity through the Strait of Hormuz could gradually return to normal.
Brent crude closed below USD 80 a barrel on Tuesday for the first time since July 13. The benchmark had fallen more than 5 per cent on Tuesday, extending Monday’s sharp decline.
However, Iran has denied US President Donald Trump’s assertion that talks between Washington and Tehran are already under way.
Trump and Qatar’s Emir Sheikh Tamim bin Hamad Al Thani discussed efforts to narrow differences between the US and Iran and improve the prospects of a lasting settlement during a phone call on Tuesday, according to Qatar’s Emir’s office.
For oil markets, the progress of these diplomatic efforts remains important because the Strait of Hormuz is a key route for global energy supplies.
Strait of Hormuz remains a key concern
Before the war began, around 20 per cent of the world’s oil and liquefied natural gas moved through the Strait of Hormuz. The waterway has remained a major source of uncertainty for oil traders as the conflict has disrupted shipping activity.
A US official has said temporary shipping routes through the Strait of Hormuz would not require permits, approvals or fees. According to media reports, the official said no single party controls navigation through the strategic waterway or has the ability to prevent vessels from transiting through it.
However, Iranian officials have continued to challenge US statements regarding the reopening of the strait.
The uncertainty means that the oil market remains highly sensitive to developments in the region. Any sustained improvement in shipping activity could reduce concerns over supply disruptions and put further pressure on crude prices.
Hormuz vessel traffic remains subdued
Despite renewed diplomatic efforts, vessel traffic through the Strait of Hormuz has remained weak. According to an S&P Global report, only 17 vessel crossings were recorded through the strait on August 2, compared with 15 on August 1 and 17 on July 31.
A total of 848 vessel transits were recorded through the Strait of Hormuz in July, averaging 27 crossings a day. However, traffic slowed considerably during the second half of the month, with daily crossings averaging 17.
July traffic was lower than the 917 transits recorded in June, which was the highest monthly volume since the beginning of the conflict. The report also said Iran-linked vessels accounted for 53 per cent of total traffic in July, up from an average of 42 per cent in June.
Iraqi crude shipments also decline
The disruption in shipping has also affected crude flows. According to S&P Global Commodities at Sea data, 10 crude tankers carrying Iraqi crude successfully exited the Strait of Hormuz during July. These vessels transported around 648,000 barrels per day, down 27 per cent from 883,000 barrels per day in June.
The decline highlights the impact of lower vessel traffic on physical oil flows, even as crude prices have recently fallen on expectations of a possible diplomatic breakthrough.
Traffic through the US naval blockade remained largely stable. An average of 41 vessels per day crossed the blockade in the week ending August 2, slightly lower than 46 vessels per day in the previous week.
What next for crude oil prices?
For now, oil prices are likely to remain driven by developments surrounding the US-Iran conflict and the Strait of Hormuz. A sustained ceasefire or agreement between Washington and Tehran could lead to a further recovery in shipping activity. This would ease concerns about supply disruptions and could keep crude prices under pressure.
At the same time, continued security incidents or a prolonged disruption to the Strait of Hormuz could quickly revive concerns over global oil supplies.
The Bab el-Mandeb Strait is also being closely watched. S&P Global said traffic through the waterway totalled 1,298 transits in July, averaging 42 crossings a day, broadly unchanged from June. However, northbound traffic weakened sharply in recent days, with only 10 vessels recorded on August 2.
For oil traders, therefore, the key question is whether diplomatic progress translates into an actual improvement in shipping activity. Until there is greater clarity on the situation, crude prices are likely to remain sensitive to every development around the US-Iran conflict and the two critical shipping routes.
