Oil down amid US efforts to reopen Strait of Hormuz

Oil drilling rigs

Brent crude was trading down 0.6% at $113.76 a barrel, at 01:00 GMT, after closing 5.8% higher in the previous session. West Texas Intermediate (WTI) fell 1.5% to $104.83 a barrel.

The US launched a new operation on May 4 aimed at reopening the strait to maritime traffic. Later, Maersk announced that the US-flagged vehicle carrier “Alliance Fairfax” had exited the Gulf through the strait under US military escort, easing some concerns over supply disruptions, Reuters reported.

Tim Waterer, Chief Market Analyst at KCM Trade, said the escorted departure of the Maersk-operated vessel helped ease immediate fears of supply disruption.

In an email statement to Reuters, he added: “This shows that limited safe passage is possible under current conditions and helps alleviate some of the worst-case concerns regarding supply interruptions.”

However, he noted that the situation remains highly exceptional and does not yet represent a full reopening of the strait.

Iran launched attacks on May 4 to counter the US move. Several commercial vessels were reportedly struck in the area, while fire was reported at a key oil port in the United Arab Emirates after an Iranian strike.

Meanwhile, Chevron Chairman and CEO Mike Wirth said physical shortages in oil supply would begin appearing around the world because of the Hormuz closure, the report noted.

Goldman Sachs said because of the disruptions, global oil stocks are approaching their lowest level in eight years. The bank warned that the speed of depletion was becoming a concern as supplies remained restricted.