Amidst US-Iran war, Oil fall beyond $1 on greater flows

By Aliyu Adam 

Oil prices fell on Friday but kept on track for a monthly rise of about a fifth, as more supplies flowed through crucial maritime chokepoints, ‌despite a lack of major breakthroughs in talks between the United States and Iran.

Brent futures fell $1.44, or 1.6%, to $87.59 a barrel by 0658 GMT, while U.S. West Texas Intermediate (WTI) crude slipped $1.59, or 1.9%, to $82 a barrel. On a monthly basis, both benchmarks were set to rise about 20%.

Crude oil ⁠is edging lower as rising Middle East tension is being offset by signs of increased flows in the Strait of Hormuz, said Daniel Hynes, a senior commodity analyst at ANZ.

The strait, which usually carries about a fifth of global shipments of crude oil and liquefied natural gas, has been a focal point for oil markets as it has been largely blockaded since the February 28 launch of the U.S.-Israeli war on Iran.

Saudi Arabia seeks to lead a ‌coalition ⁠to boost defence cooperation in the Bab el-Mandeb strait, the Red Sea and the Gulf of Aden, all chokepoints for energy supplies.

The Saudi defence ministry said 14 nations, including Djibouti, Egypt, Pakistan, Sudan and Turkey, were in support of the multinational maritime ⁠defence coalition.

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Iran-aligned Houthi militants in Yemen declared a naval blockade last week on Saudi Arabia, threatening the Red Sea route for its oil exports, an alternative to the Strait ⁠of Hormuz.

According to analyst at Phillip Nova, Priyanka Sachdeva, although tanker traffic has continued through the Strait of Hormuz and the Red Sea, higher security risks have boosted freight costs and insurance premiums ⁠to embed a significant geopolitical risk premium in oil prices.

“While prices eased from recent highs, the broader trend remains constructive,” Sachdeva said.