Oil Prices Ease as Traders Focus on Gulf Supply Flows

Oil prices retreated on Thursday after posting some of their strongest gains of the week as investors assessed whether crude supplies could continue reaching global markets despite escalating attacks and disruptions across the Middle East.

Brent crude futures fell 96 cents, or 1.06 percent, to $89.78 a barrel by 7:18 a.m. Saudi time. US West Texas Intermediate crude dropped 64 cents, or 0.76 percent, to $83.82 a barrel.

The declines followed a sharp rally in the previous session. Brent settled 7.91 percent higher on Wednesday, while WTI gained 6.56 percent in one of the biggest price increases since the start of the Iran conflict. The rise came after oil prices had dropped about 5 percent on Tuesday when a pause in hostilities eased concerns about immediate supply disruptions.

Prices jumped again after US President Donald Trump warned on Wednesday that Iran would face a strong response following an Iranian missile attack on a US base in Jordan.

The United States and Saudi Arabia also launched attacks against Iran-backed paramilitary groups in Iraq on Wednesday. It was the first time Saudi Arabia had publicly joined US air strikes in the conflict. The attacks followed drone strikes on Saudi oil facilities launched from Iraq.

The US military also carried out approximately two hours of strikes against targets in Iran, according to US Central Command, ending a pause in American attacks that had started over the weekend.

Lin Ye, vice president of commodity markets at Rystad Energy, said the sharp rise in oil prices triggered by Trump’s warning appeared to have been largely absorbed by the market.

He said geopolitical developments were producing rapid price movements, but those gains could fade when traders assessed actual supply conditions and diplomatic activity.

A key factor limiting the rise in prices is that crude continues to reach international markets despite severe disruption around the Strait of Hormuz. Iran closed the waterway after the US-Israeli war began on February 28. Before the closure, the route carried about one-fifth of global oil and gas flows.

Rystad Energy estimates that around 13 million barrels per day of oil from the Gulf is still reaching buyers through various routes.

Shipping has also continued despite an announcement by Iran-aligned Houthis in Yemen of a naval blockade targeting Saudi Arabia in the Red Sea on July 20. Some cargoes, particularly those carried by Chinese-linked tankers, have continued moving toward international markets.

IG market analyst Tony Sycamore said reduced volumes were being offset by alternative routes and other methods of transporting crude. He said continued use of these alternatives could gradually reduce Iran’s ability to restrict oil flows through the Strait of Hormuz.