Oil Prices Near One-Week Low After U.S., Iran Pause Fighting Over Weekend
LONDON, July 27 (Reuters) – Oil prices hovered at a one-week low on Monday after the United States and Iran paused attacks over the weekend after two weeks of attacks, raising hopes of a diplomatic solution that would ease the conflict and allow shipping to resume in the Strait of Hormuz.
Brent crude futures LCOc1 fell $5.85, or about 6%, to $90.93 a barrel as of 13:09 GMT. Early in the session, it fell as much as 9.5% to $87.55 per barrel.
U.S. West Texas Intermediate crude CLc1 was down $4.98, or around 5.6%, at $84.33 a barrel and was down as much as 8% earlier in the day at $82.12 a barrel.
Both contracts were trading at their lowest levels since July 20 at the start of the session.
Brent reached $100 per barrel as the conflict, which reduced oil shipments through the Strait of Hormuz, spread to the Red Sea and prevented Saudi Arabia, the world’s largest exporter, from exporting to Asia via the Bab el-Mandeb Strait.
US Ambassador to the United Nations Mike Waltz told Fox News Sunday and other US media that President Donald Trump has decided to pause US attacks to give more time for diplomacy.
“The market seems to be constantly looking for good news from an arena that’s not actually delivering anything,” said PVM analyst John Evans.
“The end of military offensives may seem like an improvement, but it does not provide any guarantee that oil will flow from the region soon… prices will only continue to fall if high prices once again negatively impact demand, not dubious mini-truces.”
Prices regained losses throughout the day after Saudi Arabian air defenses intercepted and destroyed drones launched from Iraq that were trying to target oil facilities in the kingdom’s Eastern Province and Riyadh, and the country’s foreign ministry said it had the right to respond to the sources of the “attack”.
Yemen’s pro-Iran Houthis said they also targeted a series of sensitive crude oil supply and shipping sites connecting eastern Saudi Arabia to the Red Sea city of Yanbu.
Appearance Uncertain Without Signed Frame
“There is no signed framework, no verification mechanism and no agreed upon timeline; from what we can see, both sides appear to have halted filming since Friday,” said Ole Hvalbye, market analyst at SEB Research.
Shipping data from Kpler showed fewer than 10 commercial ships a day passed through the Strait of Hormuz over the weekend.
“Flows have fallen to around 15% of pre-war levels, versus the normal flow of crude oil, condensate and products of roughly 20 million barrels per day. A political pause would not harm the water by a single barrel more in the here and now,” Hvalbye added.
In addition, ship traffic across the Bab al-Mandeb strait dropped on Sunday after Yemeni Houthis attacked Saudi oil facilities on the Red Sea coast, but a third Chinese supertanker departed through the Bab al-Mandeb strait.
Kazakhstan, among the world’s top 10 oil producers, has cut its daily oil production by more than half after Russia’s main export terminal on the Black Sea was closed due to drone attacks, an industry source said on Monday.
The energy ministry later said that the Caspian Pipeline Consortium’s Black Sea terminal had resumed oil loadings.
(Reporting by Florence Tan and Trixie Yap, additional reporting by Anushree Mukherjee; Editing by Jamie Freed and Emelia Sithole-Matarise)
