Crude prices fall despite Hormuz tanker disruptions

Crude oil prices are heading for a weekly decline despite weak tanker traffic through the Strait of Hormuz amid escalating tensions between Iran and the United States.

Brent crude was trading at $89.17 per barrel as of Friday, down 5.3 per cent for the week, while West Texas Intermediate stood at $83.19 per barrel, with the benchmark on course for a 4.3 per cent weekly decline, Reuters reported.

The decline came despite reports that tanker traffic through the strategic Strait of Hormuz remained significantly below pre-war levels.

According to preliminary data from vessel-tracking firm Kpler cited by Reuters, only seven commodity vessels passed through the Strait of Hormuz on Thursday, down from 17 vessels the previous day and below the 10-day average of 15 vessels.

Another vessel-tracking company, Windward, reported that only six tankers passed through the chokepoint on Thursday, with three operating in “dark mode” to avoid detection.

Four of the tankers entered the strait, while two exited, according to the report.

The Strait of Hormuz is a critical global oil chokepoint, making the reduced tanker movement potentially bullish for crude prices. However, oil prices have continued to decline as the market adapts to the disruption.

Bloomberg reported that oil flows through the strait had risen to between six million and eight million barrels per day, according to estimates from unnamed traders.

Goldman Sachs estimated that oil flows through Hormuz had recovered to about two-thirds of pre-war levels, while ING’s commodity analysts said producers in the Persian Gulf were increasingly finding ways to move crude outside the strait.

“More Persian Gulf oil producers seem to be shuttling their crude through the strait, while producers in the region are increasingly selling their crude outside the Strait of Hormuz,” ING analysts Warren Patterson and Ewa Manthey said.

The development came as the United States Treasury announced what it described as the “toughest sanctions in history” aimed at forcing Iran to reopen the Strait of Hormuz.

The Donald Trump administration has also ruled out returning to the terms of the ceasefire reached with Iran in June, which broke down less than a month after it was agreed.

“As the president said, there are no talks or conversations going on, or scheduled, with the Islamic Republic of Iran,” White House spokeswoman Anna Kelly said, according to the Wall Street Journal.

“The naval blockade remains in full force and effect, and Operation Economic Outcast is underway to sever every remaining economic lifeline sustaining the regime.”

Despite the intensifying tensions, the effectiveness of the US pressure campaign has been questioned, particularly because of China’s role as Iran’s biggest trading partner.

China has repeatedly opposed sanctions as a means of achieving political change, potentially limiting the impact of the US measures.

Meanwhile, ING said upward pressure on crude prices remained because of fading hopes for renewed peace talks between Tehran and Washington.

There were also expectations that Venezuela could leave OPEC following increased United States control over its oil industry.

Such an exit could eventually result in higher Venezuelan production, although analysts cautioned that a rapid increase in output was unlikely because the country would need time to reverse years of decline in its oil industry.