Oil Prices Fall as Middle East Tensions Offset by Increased Flows

Oil prices fell on Friday but remained on track for a monthly rise of about 20%. Brent futures dropped by $1.03, or 1.2%, to $88 a barrel, while US West Texas Intermediate (WTI) crude slipped $1.50, or 1.8%, to $82.09 a barrel.

According to Daniel Hynes, analyst at ING, rising Middle East tension is being offset by increased flows in the Strait of Hormuz. The strait, which carries about a fifth of global shipments of crude oil and liquefied natural gas, has been largely blockaded since the February 28 launch of the US-Iran conflict.

Saudi Arabia has announced plans to lead a coalition for boosting defence cooperation in the Bab El-Mandeb Strait, the Red Sea, and the Gulf of Aden. The Saudi defence ministry stated that 14 nations are supporting this multinational maritime defence coalition, including Djibouti, Egypt, Pakistan, Sudan, and Turkey.

Priyanka Sachdeva, analyst at Phillip Nova, noted that while prices eased from recent highs, a significant geopolitical risk premium remains embedded in oil prices due to higher security risks and increased freight costs and insurance premiums.