Oil Holds Gains After Ship Attack in Hormuz
Oil prices held onto most of their gains after a cargo ship was attacked near the Strait of Hormuz. The incident rekindled concerns about the safety of the vital shipping lane, even though shipping flows had begun to improve following progress on a deal between the United States and Iran.
Brent traded around US$75 per barrel after rising more than 2% in the previous session. Meanwhile, West Texas Intermediate, or WTI, was below US$72 per barrel. In Thursday's trading, Brent briefly erased all of its war-induced gains before rebounding after reports of an attack on a ship southeast of Oman.
The attack occurred as ships began to return to open passage through the Strait of Hormuz. The reopening of the waterway had previously added millions of barrels of oil to the global market and had depressed oil prices in recent days. However, the latest incident has raised questions about how quickly oil flows from the Persian Gulf can truly return to normal.
Further talks between Washington and Tehran are expected to be lengthy, particularly regarding the nuclear issue and regulating shipping lane security. Despite this, oil prices have fallen sharply in recent weeks and are still on track for a third weekly decline. Brent futures have even fallen more than 6% so far this week.
The Wall Street Journal reported that the ship was hit by an Iranian attack. However, a White House official said it was too early to determine who was responsible for the attack. According to the official, the United States is still investigating the perpetrators.
This incident also occurred as several commercial vessels reportedly turned back while attempting to pass through the Strait of Hormuz. The International Maritime Organization (IMO), the global shipping regulator under the United Nations, stated that it had temporarily suspended ship evacuation operations in the strait to ensure safety.
Currently, there are two main exit routes through Hormuz because the normal passage through the middle is still suspected of being at risk of mines. One route runs near Iran, while the other follows the coastline of Oman and is protected by the United States. However, Iran's Persian Gulf Straits Authority stated that ships passing outside the designated route framework will not be guaranteed safety.
US President Donald Trump announced Thursday evening that the Strait of Hormuz is open. The statement came at the White House when he suggested Iran would purchase US agricultural products with frozen assets, a claim Tehran later denied.
BOK Financial Securities analyst Dennis Kissler believes the rise in oil prices following the attack appears more like short-covering. He believes the already heavily oversold oil market could potentially experience a temporary correction before renewed selling pressure emerges.
Prior to the incident, oil from the Persian Gulf had been flowing out of the Strait of Hormuz at the fastest rate since the war began. Goldman Sachs estimates that Gulf exports are now running at nearly two-thirds of normal levels, while the apparent decline in global inventories is slowing.
However, Gulf oil producers still face challenges securing tankers to transport oil out of the region. Iraq was even forced to halt production at one of its major fields due to a shortage of vessels. Meanwhile, the United Arab Emirates, Kuwait, and Qatar continue to increase supply.
Iraq is also seeking a higher OPEC production quota to recoup lost oil sales during the war. Although there was talk that the country might consider leaving OPEC, the Iraqi Ministry of Oil later emphasized that leaving the group was not yet the government's official position.
Under these conditions, the oil market remains torn between two major forces. On the one hand, the normalization of the Hormuz Current and increased Gulf production could depress prices. However, on the other hand, ship attacks and uncertainty about shipping lane security mean that the geopolitical risk premium has not completely disappeared from oil prices. (asd)*
Source: Newsmaker.id
