Oil Falls But Still Near One-Month High
Oil prices fell in trading Thursday (16/7), but still remained near the highest level since mid-June. Price pressure is restrained because Iran's war is escalating again and Tehran is said to have asked the Houthi group in Yemen to prepare to close the Red Sea oil export route.
Brent oil weakened 0.85% and closed at US$84.23 per barrel. Meanwhile, West Texas Intermediate or WTI fell 0.82% to US$78.95 per barrel. Even though they closed lower, both benchmark prices rose more than 1% to their session highs.
The main risk comes from the threat of disrupting two important energy pathways at once. The Strait of Hormuz is already disturbed by the US-Iran conflict, while the Bab el-Mandeb in the Red Sea could potentially be threatened if the Houthis completely close the route. The Bab el-Mandeb route is important because the volume of oil passing through it reached about 7.4 million barrels per day in June, or about 7% of global oil production.
Tensions escalated after the US attacked Iran's coastal defenses and missile sites, and re-imposed a naval blockade of Iranian ports. Tehran responded with threats to disrupt more regional energy exports and called the conflict with America an “existential war.”
Ship flows in the Strait of Hormuz have also decreased. Only seven ships passed through on Wednesday, down from 13 the previous day. This condition shows that shipping players are still careful because the risk of attacks, blockades, insurance costs and supply chain disruptions is still high.
The impact on the market is that oil is indeed weakening daily, but the risk of an increase remains large as long as Hormuz and the Red Sea are both threatened. If the Middle East's two main export routes are disrupted simultaneously, oil prices could spike again and trigger global inflation concerns. However, the release of a US citizen by Iran gives some hope that the diplomatic space is still not completely closed.
Source: Newsmaker.id
