Brent and WTI extended a fourth straight day of losses as Qatar's prime minister traveled to Tehran to press for a reopening of the Strait of Hormuz. Qatar and Kuwait have separately restored their own oil exports through the strait to 70% of pre-war levels, and an analyst points to reduced fears of a supply shock even as U.S. inventories stay thin.
Brent crude traded at $87.46 per barrel and West Texas Intermediate at $81.83 per barrel on Thursday, extending a fourth straight day of declines, even as a new report surfaced of a strike on a tanker in the Strait of Hormuz. Qatar's Prime Minister Sheikh Mohammed bin Abdulrahman al-Thani traveled to Tehran the same day to discuss reopening the strait, Iran's Foreign Ministry said.
Qatar presses for a Hormuz reopening
Iran's Foreign Ministry spokesman Esmaeil Baghaei said the talks would center on Qatar's mediator role and the latest developments around Hormuz. According to Reuters, Qatar's Foreign Ministry spokesperson said the talks would also cover freedom of navigation and the strait's possible reopening. The goal, the spokesperson said, is to "de-escalate tensions and create the conditions conducive to dialogue."
The United States has opted for economic pressure over military action, imposing new sanctions on Iran's oil industry and other sectors of its economy to push Tehran toward reopening Hormuz. Iran answered with a blacklist of 45 tankers it said would be fair targets if they violate navigation rules it set earlier this year. ING analysts wrote Thursday that an Iran-Oman deal on jointly managing the strait would not by itself normalize oil flows, and that the U.S. would likely need to lift its Iranian port blockade and ease sanctions first.
Gulf states quietly reroute exports
Qatar and Kuwait have boosted their crude exports through Hormuz to 70% of pre-war levels, following the United Arab Emirates in using ship-to-ship transfers in the Gulf of Oman, traders told Bloomberg. The two countries collectively exported about 2 million barrels per day through the strait before the conflict, but they lack the alternative routes Saudi Arabia and the UAE have and struggled to ship oil in the war's first months before beginning shuttle operations around June.
Saudi Arabia has also begun using the Red Sea and Egypt's Mediterranean ports to bypass the Persian Gulf chokepoint. Total oil flows through the strait have risen to about 7-8 million barrels per day, up from about 4 million barrels per day in mid-July, according to Bloomberg's trading sources.
Analysts warn the supply cushion is thin
Naeem Aslam, chief investment officer at Zaye Capital Markets, said the key catalyst behind the pullback in the crude oil market is the possibility of a phased Hormuz reopening alongside President Trump's statement that U.S. forces have cleared mines from the main shipping lane. Saxo Bank said Thursday that oil prices were down about 8% from Monday's peak amid renewed Middle East supply optimism.
Aslam cautioned that the physical market still argues against reading the decline as fully bearish: U.S. commercial crude inventories rose just 95,000 barrels last week while the Strategic Petroleum Reserve fell 3.7 million barrels to 289.7 million barrels, a level he called historically low. He also pointed to the IEA's outlook for demand to fall 1.6 million barrels per day even as supply declines 4.3 million barrels per day.
If Hormuz shipping normalizes faster than expected, prices could fall further, Aslam said. But if talks fail or disruption returns, the limited supply buffer means renewed geopolitical risk could send Brent and WTI sharply higher again.
Sources: Investing.com, Investing.com, Rigzone.com
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