New York [US], July 17: Oil prices fell about 1 percent on Thursday but remain near the highest since mid-June as the Iran war escalated, with Tehran asking Yemen's Houthi movement to be prepared to close the Red Sea oil export route.
Brent crude futures fell 75 cents, or about 0.9 percent, to $84.20 a barrel by 1:55 p.m. EDT (1755 GMT). US West Texas Intermediate futures fell 81 cents, or 1 percent, to $78.79 a barrel. At their session highs, both contracts were up more than 1 percent.
On Wednesday, Brent futures settled at their highest since June 12, and WTI at the highest since June 15.
Iran has asked the Houthis to stand ready to close the Red Sea oil route if the US strikes Iranian power infrastructure, three sources told Reuters. This week, US President Donald Trump repeated threats of striking Iranian power plants and bridges.
"With the Strait of Hormuz already closed, this threat raises the serious risk of both of the Middle East's primary oil export routes being disrupted at the same time," said Alex Hodes, director of energy market strategy at brokerage StoneX.
Total volumes of petroleum transiting Bab el-Mandeb amounted to 7.4 million barrels per day in June, or about 7 percent of global oil output, according to Kpler data, up from 4.2 million bpd last year.
"Simultaneous disruptions affecting Hormuz and Bab el-Mandeb would significantly amplify supply chain stress, increase tanker availability constraints, and raise insurance premiums," said Wael Makarem, financial markets strategist lead at Exness.
On Wednesday, the US struck Iran's coastal defences and missile sites after reimposing a naval blockade of its ports. Tehran threatened to shut off more regional energy exports, saying it was engaged in an "existential war" with America.
The fragile truce reached in June has collapsed, disrupting energy flows through the Strait of Hormuz, which handled about a fifth of daily global oil and LNG trade before the war began. Seven vessels passed through the strait on Wednesday, the day after the US reimposed its naval blockade on Iran, down from 13 the previous day.
"It is unlikely that (the decline in Strait crossings) changes without tensions settling," Hodes said.
Iran and the US exchanged intensified fire on Thursday, which kept upward pressure on prices. Weighing on prices was Iran's release of a US citizen, which could point toward a path to avert the resumption of all-out war.
On the supply side, Iraqi crude loadings more than doubled to average roughly 1.2 million barrels per day in the first half of July, according to Kpler data and a source with direct knowledge of the flows, as exports accelerated following months of restricted shipments.
Meanwhile, the average price of diesel fuel in the US has increased again to more than $5 a gallon, according to the AAA, and the average price of gas is almost $4, returning to their highs before the June memorandum of understanding between the US and Iran.
It is a reminder to consumers and truckers of the costs of the Iran war and the unpredictable rhetoric from both Washington and Tehran. A year ago today, the AAA says, the average price for a gallon of diesel was $3.72, almost a dollar and a quarter less than it is now.
Diesel price hikes, the AAA says, lead to rising costs across the board. "The impact is universal," said an AAA spokesman, Robert Sinclair Jr. "Everything gets to the retail consumer by diesel-burning truck."
Source: Qatar Tribune
