Oil prices around the world fell further on Friday as Brent crude slumped 1.74% to $74.19 per barrel. The latest price drop comes amid reduced worries about disruptions to the flow of crude oil from the Middle East region. The benchmark is now expected to register a substantial loss for the week amid the unwinding of the geopolitical risk premium accumulated during the first half of the week.
The fall comes as crude shipments through the Strait of Hormuz resumed at a steady pace, easing fears of prolonged disruptions to one of the world's busiest energy corridors. The development has shifted market attention back to demand fundamentals and global supply conditions.
According to reports, Brent crude futures slipped 1.74 percent, to $74.19 a barrel, while U.S. West Texas Intermediate crude fell 1.96 percent, to $70.51 a barrel. Nearly one-fifth of global oil traffic passes through the Strait of Hormuz. Any threat to this channel usually causes an increase in oil prices, as it creates the threat of oil shortages.
But oil tanker shipments have returned to normal since the threat of conflict in the region seems to be easing. The continued movement of tankers through the strait reassured traders that oil exports from the Gulf remain unaffected. As a result, crude prices gave up much of the gains recorded during the recent geopolitical flare-up.
With immediate supply risks fading, investors are now focusing on global demand. Weak economic indicators from China, the world's largest crude importer, continue to weigh on the outlook for fuel consumption.
Brent crude is on track to register a weekly decline of around 8%, draining a major portion of its gains amid geopolitical uncertainty. The market is shifting from supply concerns to demand expectations and inventory levels.
Oil prices might be volatile amid geopolitical instability, shipping security in the Gulf, OPEC+’s production policy, and the pace of global economic growth. If there are any flare-ups in the region, the geopolitical premium may be reinstated; however, low demand may continue to weigh on prices.
Also read: Oil Price Today: Brent Near AED 286 as US-Iran Talks Ease Supply Fears