Oil Prices Decline as Market Focus Shifts to Supply Flows

Oil prices erased some of their previous gains on Thursday as investor focus shifted to supply flows through key chokepoints in the Gulf region. The Brent futures price fell by $0.96, or 1.06%, to $89.78 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped by $0.64, or 0.76%, to $83.82 a barrel.

The prices surged on Wednesday after U.S. President Donald Trump threatened to hit Iran 'very hard' following an Iranian missile attack on a U.S. base in Jordan. However, the market seems to have already priced in this threat and is now considering the possibility that Trump might not follow through with his promises.

Rystad Energy's Lin Ye noted that geopolitical headlines often trigger rapid price spikes, but these gains are usually short-lived as actual supply flows and diplomatic efforts determine how long prices persist. The market is currently focusing on the fact that around 13 million barrels per day of oil from the Gulf region is still reaching markets despite the near shutdown of the Strait of Hormuz.

Some analysts believe that alternative routes and methods are being explored to bypass the Strait of Hormuz, which could erode Iran's leverage over global oil supplies. This perspective suggests that the situation may not be as dire as previously thought, and prices may not continue to surge in response to escalating tensions.