Oil declines on supply risks and sanctions relief expectations
Quick Look
- Oil prices fell more than $1 in early trading Thursday as the United States considered easing sanctions on some ships to reduce oil transportation costs, even as supply risks rise as attacks on ships around the Strait of Hormuz increase.
- Brent dropped to $104.67 per barrel and WTI dropped to $94.07.
AI-generated summary
Why It Matters
The Strait of Hormuz is a critical route for world oil transportation. Tensions in the region directly affect oil prices. The USA is re-evaluating the sanctions it imposes on 'shadow fleet' ships carrying oil from countries such as Russia, Iran and Venezuela.
Oil fell more than $1 in early trading on Thursday as the United States considered easing sanctions on some ships to reduce oil transportation costs, even as attacks on ships around the Strait of Hormuz increased supply risks.
Brent oil futures contracts decreased by 1.31 percent to $104.67 per barrel. US crude oil (WTI) lost 1.07 percent to $94.07, erasing the gains it made in the previous session.
WTI had risen to a three-week high in the previous session after the Houthis attacked Saudi Aramco's headquarters and Iran announced that it was using new tactics to target ships in the Strait of Hormuz.
On Wednesday, a container ship and a dry cargo ship sank after being hit with ammunition in separate incidents near the Bosphorus, according to maritime officials. While attacks in the region have increased in the last 10 days, Iran reported that it intensified its attacks in response to the US blockade of its ports and the sanctions tightened last month.
While the Iran war disrupts maritime transportation and raises freight costs to record levels, the Trump administration is considering easing sanctions on ships called the "shadow fleet" that carry oil from countries such as Russia, Iran and Venezuela in order to reduce oil prices. According to a US official, the talks are focusing on allowing the transportation of "legal oil" by previously sanctioned ships.
The increase in production in Russia and the Middle East also limited the pressure on prices. According to the International Energy Agency (IAA), Russia's crude oil production increased by 65 thousand barrels per day in September, reaching 8.43 million barrels. Despite this, production remained 870 thousand barrels per day below the same period last year.
IEA reported that crude oil exports from producers in the Middle East Gulf also increased by 4.4 million barrels per day in September, reaching approximately 75 percent of pre-war levels.
In the USA, according to American Petroleum Institute (API) data, crude oil and distillate stocks decreased last week, while gasoline stocks increased. Crude oil stocks decreased by 11.1 million barrels in the week ending October 9.
What to Watch
AI outlook — possibilities, not facts
US may ease sanctions on some ships in the short term
Possible · Within weeks
Attacks in the Strait of Hormuz may continue in the short term as Iran responds to sanctions
Likely · Within weeks
Open Questions
- To which ships will the US sanctions relief policy be applied?
- How often and against what targets will Iran's attacks in the Strait of Hormuz continue?
- How long will Russia's production increase affect oil prices?
