Oil prices fell on Monday 20 July after Iran’s Foreign Ministry indicated that negotiations with the US could continue, citing national interests, reported Reuters.
The comments prompted a reversal of earlier gains, which had pushed oil benchmarks to their highest levels in more than a month amid concerns over disruptions to tanker movements in the Strait of Hormuz.
By 08:52 GMT, Brent crude futures had declined by $0.14, or 0.16%, trading at $87.96 per barrel (bbl). Earlier in the session, Brent reached $91.42/bbl, the highest figure recorded since 11 June.
US West Texas Intermediate (WTI) crude also retreated, falling by $0.50, or 0.61%, to $81.99/bbl, after hitting the highest level since 12 June.
Both benchmarks recorded their largest weekly rises since early March and April, with Brent and WTI jumping 15.9% and 15.5%, respectively, last week.
The escalation began over the weekend, when the US launched its ninth consecutive night of strikes against Iran, with regional allies Kuwait and Bahrain also reporting further Iranian attacks.
Reports from Iran’s Islamic Revolutionary Guard Corps on Monday claimed that two oil tankers exploded and were immobilised after attempting to navigate a southern route through the Strait of Hormuz.
Both the US and Iran have recently targeted maritime activity, with the US announcing the enforcement of a naval blockade on Iranian ports and Iran stating it would act against ships violating its navigation rules in the area.
The UK Maritime Trade Operations (UKMTO) centre reported a vessel on fire north-west of Kumzar in Oman on Monday.
Passage through the Strait of Hormuz has slowed, with four vessels transiting on Sunday compared to eight the previous day, according to LSEG data.
Since Friday, at least three oil product tankers and one large crude carrier have entered the strait to load oil.
Elsewhere, the Caspian Pipeline Consortium (CPC) reported that an oil tanker near Russia’s Black Sea coast was attacked and damaged by two drones on Friday, reported Reuters.
The vessel, identified as the Nordic Zenith and chartered by ExxonMobil, was not attributed to any specific party by CPC.
The region has witnessed a recent escalation in attacks on shipping linked to the ongoing conflict between Russia and Ukraine.
The CPC pipeline, which connects Kazakhstan's oilfields to Russia's Novorossiysk port, accounts for approximately 80% of Kazakhstan’s oil exports and has faced disruptions due to strikes on its facilities since the conflict began.
Last week, TS Lombard’s Freya Beamish wrote in a report that renewed fighting in the Strait of Hormuz is pushing energy prices higher. She put a low probability on disruption severe enough to drive commodity prices up and shift inflation into a “rising volatile inflation” regime.
However, Beamish said risks have increased because the flare-up comes amid depleted inventories and reduced global refining capacity after Ukrainian strikes on Russian refineries cut capacity by around 10% worldwide.
She added that refining margins, the gap between crude prices and prices for fuels such as petrol and diesel, remain above pre-war levels. China’s ability to defer oil imports and continue exporting refined products remains the key stabiliser, Beamish added.
