Oil Prices Slip After Three-Day Rally
Oil prices moved slightly lower on Thursday after giving up earlier gains.
The pullback followed three consecutive sessions of increases as investors assessed how continued US military action against Iran could affect shipping through the Strait of Hormuz.
September Brent crude futures fell by around 0.6% to $84.42 per barrel. West Texas Intermediate crude declined approximately 0.4% to $79.30 per barrel.
Crude Remains Near One-Month Highs
Despite Thursday’s modest decline, both major oil benchmarks remained close to their highest levels in a month.
Brent and WTI had surged by almost 10% at the beginning of the week after fighting involving Iran intensified again.
The sharp rally reflected fears that a wider conflict could disrupt oil and natural gas supplies from the Gulf region.
Strait of Hormuz Remains the Main Market Risk
Investors continued to focus on the security of the Strait of Hormuz.
Around one-fifth of global oil and liquefied natural gas shipments normally pass through the vital waterway.
Any major interruption could reduce global energy supplies, increase transportation costs, and place further upward pressure on crude prices.
US Launches New Strikes Against Iranian Targets
The recent oil-price gains followed another round of US attacks on Iranian military sites on Wednesday.
Washington said the targets were connected to attacks against commercial vessels.
US officials described the operation as an effort to weaken Iran’s ability to threaten shipping and maritime activity across the Gulf.
Iran Warns of Further Energy Disruptions
Iran said it was engaged in an existential conflict with the United States.
Tehran also warned that regional energy exports could face additional disruption if the fighting continued.
These comments increased concerns that the conflict could expand and interfere with exports from several major oil-producing countries.
Renewed Fighting Reverses Earlier Optimism
The latest escalation has weakened the optimism that followed a temporary reduction in tensions last month.
Investors had previously hoped that improving relations would allow energy shipments through the region to return to normal.
However, the latest attacks have brought supply risks back into focus and increased uncertainty across global commodity markets.
Falling Inventories Leave Oil Market Vulnerable
ING analysts said renewed supply disruptions would be particularly concerning because oil inventories declined significantly during the second quarter.
Lower stockpiles leave the market with less protection against unexpected production or shipping interruptions.
ING also noted that releases from global strategic petroleum reserves, which helped support supplies in recent months, are expected to end within the next several weeks.
The end of those releases could make the market even more sensitive to disruption risks.
US Crude Inventories Decline
The US Energy Information Administration reported that American crude inventories fell by 1.7 million barrels during the week that ended on July 10.
The decline was broadly in line with market expectations.
Lower inventories provided some support to oil prices by suggesting that supply conditions remained relatively tight.
Gasoline Stocks Fall as Summer Demand Holds Firm
US gasoline stockpiles decreased by 1.5 million barrels.
The decline came as summer driving demand remained strong during the peak travel season.
However, distillate inventories unexpectedly increased by 4.6 million barrels. Distillates include diesel and heating oil.
The mixed inventory report highlighted different demand trends across the US energy market.
IEA Warns Conflict Could Change Supply Outlook
The International Energy Agency said oil flows through the Strait of Hormuz had partially recovered during June.
However, renewed hostilities in July have made the outlook more uncertain.
The agency warned that continued disruption could undermine expectations that the global oil market will return to a supply surplus in 2027.
Until tensions ease, oil prices are likely to remain sensitive to military developments, shipping conditions, and inventory data.
