Oil Prices Rise as Tensions Return to Hormuz

SadaNews - Oil prices rose after attacks on ships in the Strait of Hormuz, highlighting the ongoing risks threatening movement in the waterway.

Brent crude climbed to nearly $73 a barrel, while West Texas Intermediate surpassed $69.

The British Maritime Trade Operations Authority reported that a tanker moving south reported being hit by a projectile on its left side about 8 nautical miles east of Lima in Oman, causing a fire. According to informed sources, the tanker is "Al-Rukayat," a liquefied natural gas carrier.

Separately, Axios reported that Iran launched at least two missiles at commercial ships transiting the strait, according to a post on X citing a U.S. official. The site's reporter added that two commercial vessels were hit and suffered significant damage, but there were no reports of injuries.

The strait reopened partially after being nearly fully closed due to the U.S.-Iran war, with convoys of at least eight vessels linked to Japan passing through recently. However, despite the recovery in maritime traffic, it still remains below pre-conflict levels.

Ship Attacks Renew Risk Premium on Oil

Oil dropped 30% in the second quarter after Washington and Tehran agreed to a temporary peace deal, easing concerns over supply disruptions from the Middle East.

Brent crude has erased the war premium that had accumulated in recent months, with some major banks, including Goldman Sachs Group and Morgan Stanley, now warning of the potential return of oversupply.

Warren Patterson, head of commodity strategy at ING Groep NV in Singapore, said: "The recent attacks on ships in the Arabian Gulf highlight that we are still very far from returning to normalcy."

He added, "A limited response from the United States may provide some short-term support for oil, but given the bearish sentiment and weakness in the physical market, any short-term spike is likely to be fleeting."

On Monday, Saudi Aramco announced it would reduce the price of its Arab Light crude to Asia for the next month by $11 per barrel to $1.50 below a regional benchmark. This is the last two times the company sold this crude at a discount during 2015 and 2020.

The move by Riyadh followed a weekend decision by members of OPEC+, including Saudi Arabia, to raise production quotas for the next month, adding to the likelihood of increased supplies. Although these additional barrels remain theoretical, the decision indicates a willingness to boost production as conditions return to normal.

Awaiting the U.S. Energy Information Administration Report

Charu Chanana, chief investment strategist at Saxo Markets, stated that the attacks "remind investors that the de-escalation trade in the Middle East remains precarious." She added, "The market may add a small risk premium for Hormuz, but it doesn't seem like we are pricing in a full-blown disruption yet."

However, Chanana noted that the global outlook still remains less supportive for oil prices, continuing that "OPEC+ is continuing to increase production, supplies from the Gulf are recovering, and the structure of the Brent-Dubai market has shifted into contango, indicating a downward pricing pattern signaling a more abundant physical market in the near term."

Further insights into market conditions will come later on Tuesday when the U.S. Energy Information Administration releases its short-term energy outlook report.

Wall Street Agrees on Oil Glut in 2027.. With Price Forecasts from $60 to $75 per Barrel

Last month, the agency raised its 2027 forecast for U.S. crude oil production by 220,000 barrels per day to 13.83 million barrels, following price increases during the war.