Oil Prices Fall as US Weighs Easing Sanctions on Tankers

Oil prices fell by more than 1 per cent on Thursday as investors assessed the threat of supply disruptions from attacks on shipping near the Strait of Hormuz against efforts by the United States to reduce transport costs by easing sanctions on certain oil tankers.

Brent crude futures dropped $1.76, or 1.7 per cent, to $104.30 a barrel by 9:25 a.m. Saudi time. US West Texas Intermediate crude futures declined $1.06, or 1.1 per cent, to $94.03, reversing gains recorded in the previous session.

WTI had climbed to a three-week high on Wednesday after Yemen’s Iran-backed Houthis attacked Saudi Aramco’s headquarters and Tehran announced new tactics aimed at targeting vessels in the Strait of Hormuz and keeping oil prices elevated.

Maritime officials said a container ship and a dry bulk carrier sank near the strategic waterway within 24 hours after being struck by projectiles in separate incidents.

Attacks in and around the strait have increased over the past 10 days, with Iran saying it is intensifying strikes in response to a US blockade of its ports and tougher sanctions introduced last month. The conflict has disrupted shipping routes and pushed freight costs to record levels.

Against this backdrop, the Trump administration is considering easing restrictions on vessels belonging to the so-called shadow fleet, which has transported oil and petroleum products from countries including Russia, Iran and Venezuela. A US official said the proposal aims to reduce shipping costs and ease pressure on energy prices.

The discussions focus on potentially allowing what the official described as “legal oil” to be transported on vessels that were previously sanctioned.

Alternative routes support supply

Higher output and exports from Russia and Middle Eastern producers have helped limit the rise in oil prices despite the disruption.

Russia’s crude oil production increased by 65,000 barrels per day in September to 8.43 million barrels per day, although output remained 870,000 barrels per day below the level recorded a year earlier, the International Energy Agency said on Wednesday.

The agency also reported that crude exports from Middle Eastern Gulf producers rose by 4.4 million barrels per day in September, reaching around 75 per cent of pre-war levels.

Priyanka Sachdeva, head of market insights at Phillip Nova, said oil was continuing to reach buyers through alternative routes and logistical arrangements despite limited evidence of an imminent peace agreement.

These arrangements have helped prevent a more severe supply shock, she said, but involve higher costs and leave global oil flows exposed to further disruption.

US inventories in focus

US crude oil and distillate inventories declined last week, while gasoline stocks increased, according to data from the American Petroleum Institute cited by market sources on Wednesday.

Crude inventories fell by 11.1 million barrels in the week ended October 9, substantially exceeding analysts’ expectations in a Reuters poll.

However, Haitong Futures said prices showed little response to the sharp decline, suggesting investors were reluctant to push them higher at current levels.

Official inventory figures from the US Energy Information Administration were scheduled for release at 12 p.m. Eastern Daylight Time, or 5 p.m. Saudi time, after being delayed by a day following the Columbus Day holiday.