Oil Prices Slide on US Sanctions Relief, Strait of Hormuz Tensions

By Adedapo Adesanya

Oil prices fell more than 1 per cent on Thursday ​as investors weighed risks to supply from attacks on shipping through the Strait of Hormuz against US ‌efforts to cut petroleum shipping costs by easing sanctions on vessels.

Brent crude futures depreciated by $1.64 or 1.6 per cent to $104.42 a barrel, while US West Texas Intermediate (WTI) crude futures were down 98 cents or 1 per cent to $94.11 per barrel.

A container ship and a dry bulk ⁠carrier both sank near the strait in the past 24 hours after being hit by projectiles in separate incidents, maritime officials said ​on Wednesday.

Attacks around the waterway have surged over the past 10 days, with Iran saying it is stepping up strikes in ​response to the US blockade of its ports and tougher sanctions introduced last month.

With the Iran war having disrupted shipping and driven up freight costs to record highs, the US government is considering easing sanctions on so-called shadow-fleet vessels that have transported oil and petroleum products from countries including Russia, ​Iran and Venezuela to help ease prices.

US President Donald Trump was considering lifting the sanctions on tankers used to transport oil and fuels from Venezuela, Russia, and Iran in a bid to ease a deepening tanker crunch.

The war in the Persian Gulf has tightened the availability of tankers because of the surge in ship-to-ship transfers off the coast of Oman, outside the Strait of Hormuz. As a result, tanker rates are running at record highs, also factoring in the risk of a drone or missile strike from Iran.

Amid these developments, Reuters reported that if any shippers want to use a sanctioned tanker, per the report, they would have to apply for that to the US Treasury Department.

The report comes on the heels of President Trump’s deal with Russia that should see the latter export up to 4.8 million tons of the fuel. The deal was criticised by US legislators and European political leaders who claimed it would boost Russia’s money for war.

Increased output from Russia and the Middle East has kept a lid on ‌prices. Russia’s ⁠crude oil production rose by 65,000 barrels per day in September to 8.43 million bpd but remained down 870,000 barrels per day year over year, the International Energy Agency (IEA) said on Wednesday.

The IEA also said crude oil exports from Middle East Gulf producers rose by 4.4 million barrels per day in September to around 75 per cent of prewar levels.

The American Petroleum Institute (API) estimated that crude oil inventories in the US fell by a massive 11.12 million barrels in the week ending October 9. In the week prior, US crude oil inventories fell by 2.09 million barrels.

Commercial crude oil inventories excluding the Strategic Petroleum Reserve (SPR) have lost more than 51 million barrels over the last 26 weeks, but US crude inventories are at roughly the same level as they were at the beginning of the year.

Official numbers from the US Energy Information Administration are due on Thursday, delayed by a day following the Columbus Day holiday on Monday.