Oil prices fell on Tuesday after a nearly 6% jump in the previous session, amid signs that the U.S. Navy is working to ease Iran's blockade of the Strait of Hormuz, which could pave the way for a return of oil supplies from the key Middle East production region.
The United States launched a new operation on Monday aimed at reopening the Strait of Hormuz to maritime traffic, while Maersk later announced that the US-flagged vehicle carrier Alliance Fairfax had left the Gulf through the strait under the protection of US military forces, which helped to calm some concerns about supply disruptions.
Brent crude futures for July delivery fell 0.8% to $113.51 a barrel, after ending the previous session up 5.8%.
US West Texas Intermediate crude also fell by 1.9% to $104.40, following gains of 4.4% in the previous session.
Tim Waterr, senior market analyst at KCM Trade, said the departure of the Maersk-operated vessel under escort helped to calm some immediate fears of supply disruptions, adding that it suggests that safe passage is possible to a limited extent under current conditions and helps to reduce fears of worst-case supply shortage scenarios, but it does not represent a full reopening of the strait, according to Reuters.
In response, Iran launched attacks in the Gulf yesterday in retaliation for US moves, amid escalating tensions between the two sides over control of the Strait of Hormuz, which connects the Gulf to global markets and typically carries about 20% of the world’s daily oil and gas supplies.
Several commercial vessels were reportedly attacked in the region, along with a fire at a major oil port in the UAE following an Iranian attack, while Donald Trump's attempt to use the US Navy to secure shipping represents the biggest escalation since the ceasefire was declared four weeks ago.
The United States is seeking to reopen the strait to alleviate the major disruption to global energy supplies, after Iran almost completely closed the vital waterway following the outbreak of war with the United States and Israel on February 28.
In this context, the CEO of Chevron warned that a significant shortage in oil supplies could begin to emerge globally as a result of the continued closure of the Strait.
Goldman Sachs also noted that these disruptions have pushed global oil inventories to levels close to eight-year lows, warning that the pace of inventory depletion is becoming an increasing concern as supply constraints continue.
