Kolkata: Crude oil prices declined fell on Friday as several leaders said that they could join the efforts to ensure safe passage of vessels through the Strait of Hormuz to resume movement of oil tankers through this narrow stretch of water beside Iran. Early on Friday, Brent futures declined $1.24, or 1.1%, to touch $107.41 a barrel. On the other hand, the other benchmark West Texas Intermediate fell $1.24, or 1.3%, to reach $94.90.
On Thursday, crude prices surged near the $120 mark, spooking markets around the world. Fortunately, there were more signs of soothing nerves in the theatre of war as Donald Trump said he has asked Israel’s prime minister not to attack the oil assets of Iran. Also, US treasury secretary Scott Bessent said they could soon waive sanctions from Iranian oil stranded on tankers.
Focus on the Strait of Hormuz
A few days after NATO allies declined Donald Trump’s offer to send warships to escort oil tankers through the Strait of Hormuz, countries such as Britain, France, Germany, Italy, the Netherlands and Japan got together to join the efforts. In a statement issued jointly, they expressed their “readiness to contribute to appropriate efforts to ensure safe passage through the Strait”.
This narrow stretch of water is critical to global energy supplies since 20% of the maritime crude oil movements take place through this strait. In fact, the most populous US state of California has suffered huge rise in petrol and diesel prices since it gets its crude supplies from the Gulf region through this strait.
No attack to oil assets
The surge in prices of crude on Thursday followed Iran attacking oil and gas assets in Qatar and other Gulf countries. On Thursday, US president Donald Trump said he urged Benjamin Netanyahu not to attack Iranian energy infrastructure.
The US administration is trying to boost crude output. Reuters stated that North Dakota’s crude output is expected to rise this month as well as in the following months. North Dakota is a large oil-producing state and it is trying to resume production in inactive wells.
Levying a transit fee on the strait?
Will Iran monetise its grip on the Strait of Hormuz? News agencies reported on Thursday that Iran might be considering a proposal to charge transit fees on vessels for allowing them to pass through the Strait of Hormuz. Iran has forced oil tankers and other vessels to pass through this stretch of water in order to gain leverage against the US and Israel by choking the world’s energy supplies during the war. Earlier, Iranian leaders said that the restrictions on vessels will continue even if it meant the energy crisis reach its heights.