ISLAMABAD (Kashmir English): Global crude oil prices decreased by over 1% to near a four-month low on Wednesday amid eased concerns over supply disruption in the Strait of Hormuz, with more oil tankers passing through the Gulf region, lessening risks of interruptions.
Brent crude oil slid 78 cents (1%) to $76.30 per barrel while WTI crude fell 78 cents (1.1%) to $72.43 per barrel. Prices of both benchmarks had already edged down the previous day, marking their weakest settlement since early March, as traders adjusted positions to the fading geopolitical tensions and a smoother flow expected through the Strait.
The Strait of Hormuz has been an area of tension amid Iran’s standoff with the U.S. Although traffic has shown some improvement recently, it still trails pre-conflict levels.
Concurrently, U.S. Authorities had, for 60 days, eased sanctions pressure on Iran, allowing the country to export more oil and lifting the pressure of reduced global supply. Moreover, tension in Lebanon also eased further, underpinning the stability.
Senior economist Tomomichi Akuta at Mitsubishi UFJ Research and Consulting noted, “Fading tensions between the U.S. and Iran lower crude prices.”
“Should the talks over Iran’s nuclear issue make any progress, crude could rise back to previously higher levels. Discussions are progressing between Iran and Oman over the passage arrangements in the Strait,” added Akuta, while U.S. Secretary of State Marco Rubio warned that Iran’s efforts to impose any transit fees through the waterway could be in contravention of international law.
A major unresolved issue remains
U.S. President Donald Trump also claimed Iran agreed to permanent nuclear inspections, a claim rejected by Iran.
Shipping data, however, showed some movement with three supertankers passing safely through the Strait of Hormuz on Tuesday.
The UN maritime agency also informed about ongoing efforts to arrange the evacuation of around 11,000 sailors and hundreds of ships stranded in the Gulf after rising tensions.
On the other hand, a report by the American Petroleum Institute on U.S. Crude inventories showed that the world’s biggest crude producer’s inventories fell by 765,000 barrels in the week ending June 19 to about 453.5 million, compared with analysts’ estimates of a decline of about 4.5 million barrels. Market participants will closely monitor oil flow in the Middle East and negotiations between the US and Iran to determine future oil prices.
This development of declining international crude oil prices could potentially translate into a reduction in fuel prices in Pakistan, with reports indicating a possibility of a decline of Rs. 62 per litre for petrol, taking the new price to around Rs. 238 per litre, subject to the government’s decision during the upcoming price review scheduled for Friday.
