Shafaq News

Oil prices turned lower on Thursday as traders took profitsand evaluated the risks from a new wave of U.S. strikes on Iranian militaryinstallations, which fuelled fears of renewed full-scale conflict and supplydisruptions in the Strait of Hormuz.

The United States struck Iran's coastal defences and missilesites on Wednesday after reimposing a naval blockade of its ports, while Iranthreatened to shut off more regional energy exports, saying it was engaged inan "existential war" with America.

After initially rising for a fourth straight session, Brentcrude futures slipped 24 cents, or 0.28%, to $84.95 a barrel as of 0435 GMT,while U.S. West Texas Intermediate futures fell 15 cents, or 0.19%, to $79.45 abarrel. Brent had gained almost $1 earlier ⁠inthe session and both contracts remained close to one-month highs.

"Geopolitical risks remain firmly supportive for oil,but after a strong rally, traders are adopting a wait-and-watch approach,"Phillip Nova senior market analyst Priyanka Sachdeva said. "The focus hasshifted from the threat itself to whether there is any tangible disruption tooil flows and how both the U.S. and Iran choose to respond in the comingdays."

Oil prices have gained this week as attacks deepened supplydisruption in the Strait of Hormuz, which handled about a fifth of the world'soil and liquefied natural gas trade before the war began.

Fewer vessels passed through the Strait of Hormuz onWednesday, the first day after the U.S. reimposed its naval blockade on Iran. Seven crossed on Wednesday, down from 13 the previous day.

Hostilities between Iran ⁠andthe U.S. reignited last week, fraying an already fragile truce reached in Juneafter several months of fighting.

"While mediation efforts by neighbouring countriescontinue and the consensus view is that a full-scale war is unlikely, WTI couldstill rise to $85–$87 depending on how the conflict develops," saidHiroyuki Kikukawa, chief strategist of Nissan Securities Investment.

Analysts say Iran has signalled it may use its Houthi alliesin Yemen to shut the Bab el-Mandeb gateway ⁠tothe Red Sea, opening a new front against Washington and putting a second of theworld's most vital energy arteries at risk.

Reuters also reported on Wednesday that U.S. officials saidthe strikes on Iran could pave the way for "more complex" operationsagainst the country, adding to market jitters.

Goldman Sachs said Brent could ⁠exceed $110 in the fourth quarter if the Gulfexport recovery continues to stall, but could fall into the $60s by year-end iftensions ease and production recovers faster than expected.

ING analysts cautioned in a note that the supply disruptionsare flaring back up at ⁠atime when U.S. commercial oil inventories are at the lowest levels since 2022,and the lowest levels for the season since 2018.

"The concern is that renewed oil supply disruptionscome amid the large inventory drawdowns through the second quarter, leaving themarket more vulnerable."

(Reuters)

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