The prospect of an international waterway reopening under the governance of Iran and Oman continued to sway oil traders on Friday, and contributed to another dip in prices as well as a weekly loss of about 5 percent.
As of 1654 GMT, Brent was down 38 cents at $89.32 per barrel, and West Texas Intermediate fell 36 cents to $83.17.
Janiv Shah, analyst at Rystad Energy, said of a reported increasing flow of transit through the Strait of Hormuz, “The market has been surprised by the additional flow, Iran-Oman shipping corridor and the U.S. mine clearance claims.
“The weekly decline would likely be due to the available volume that is able to exit the Strait and the pace of ramp-up in flows: that would allow Asian refiners to pull and consume.”
The optimism surrounding the Iran/Oman proposal to reopen the Hormuz was puzzling, considering Middle East nations along with Washington repeatedly insisted that international waters must be free of such governance.
Optimistic traders apparently glossed over Iran’s demands that full transit normalization was conditional on sanctions relief, an end to the U.S. blockade and an end to Israel’s operations in Gaza, Lebanon, and Syria.
Tehran’s list of conditions were issued after a Qatar emissary pressed the Islamic republic to respect freedom of navigation.
Meanwhile, further cracks in Iran’s resiliency became evident on Friday when its supreme leader called for political unity, warned government officials against rhetoric that could deepen divisions or undermine public confidence, and urged officials to project the republic’s “power and strength.”
In other oil news on Friday, Baltic Exchange data revealed that earnings on the benchmark Saudi Arabia-to-China supertanker route surged to a record $647,000 per day, or 10 times the rate of a year ago.
This came as Persian producers increased crude shipments through the Hormuz, and Julianne Geiger, market analyst at Oilprice.com, noted that this “in theory, should ease the oil supply crunch; instead, it has created another one: ships.”
Geiger was referring to the fact that not many tanker owners are willing transit the Hormuz, leaving exporters competing for those who will take the risk: “The result is an extraordinary premium for anyone willing to make the trip.”