Global oil prices slip as Middle East fighting limits losses

Oil prices pulled back on Tuesday as traders weighed signs that shipping could resume through the Strait of Hormuz, even as fresh clashes between the United States and Iran kept a floor under the market and underscored the risk of wider disruption.

Brent crude futures were down $4.18, or 3.6%, at $110.26 a barrel this evening, after closing 5.8% higher yesterday. US West Texas Intermediate crude dropped $4.34, or 4.1%, to $102.08, following a 4.4% rise in the previous session.

Maersk said the Alliance Fairfax, a US-flagged vehicle carrier, had cleared the Gulf through the strait under escort from the US military.

“It shows that limited safe passage is possible under current conditions and helps chip away at some of the worst-case supply disruption fears,” said Tim Waterer, chief market analyst at KCM Trade, in an email.

Iran carried out new strikes in the Gulf yesterday in response to US efforts to assert control over the Strait, the narrow waterway linking the Gulf to international markets and a route that normally handles oil and liquefied natural gas volumes equal to about 20% of global demand each day.

Several merchant vessels in the Gulf reported explosions or fires on Monday, while an oil port in the United Arab Emirates, home to a major US military base, was ignited by Iranian missiles.

The US military said yesterday it had destroyed six Iranian small boats, along with cruise missiles and drones.

“Prices continue to trade in a highly volatile range, driven largely by ongoing tensions in the Strait of Hormuz,” said Phillip Nova’s senior market analyst Priyanka Sachdeva.

“While prices have eased slightly in recent sessions, this is not due to any real improvement in fundamentals, but rather a temporary relief after the US launched ‘Project Freedom’,” she added.