Crude oil retreats from $100 as shipping data eases fears of total supply blockade
Crude futures pulled back from recent highs as vessel tracking data showed continued maritime traffic, tempering investor fears that geopolitical conflicts in the Middle East and Black Sea would trigger a severe global supply shock.
Brent crude futures settled at $96.78 a barrel, dropping $3.91, or 3.88 percent, after briefly crossing the $100 threshold for the first time since May. West Texas Intermediate finished at $89.31 a barrel, down $2.88, or 3.12 percent. Despite the daily decline, both benchmarks remained on track for weekly gains of nearly 10 percent and 8.27 percent, respectively.
The intraday retreat followed reports that China is pushing for an end to the escalating US-Iran conflict. Markets had previously rallied on fears of severe supply disruptions after the United States and Iran exchanged missile strikes and Yemen’s Houthis attacked shipping in the Red Sea.
Underlying geopolitical tensions remain elevated. US President Donald Trump promised "major military punishment" for Iran and its Houthi allies following strikes on two Saudi oil tankers. Iran has reportedly pressured the Houthis to close the Bab el-Mandeb strait if US attacks on Iranian power infrastructure continue.
However, physical supply chains have not completely seized. Preliminary data from Kpler showed daily vessel transits through the Strait of Hormuz holding steady at three per day over the past three days. Two additional ships, including the empty very large crude carrier Noble, entered the Gulf on Thursday, while commodity vessel transits at Bab el-Mandeb reached 32 on July 23.
Market participants are adjusting their risk premiums accordingly. Giovanni Staunovo, an analyst at UBS, noted that ships are still moving in the right seas, meaning the situation falls short of the complete blockade some investors feared. Again Capital partner John Kilduff captured the mood, stating, "There's nothing this market loves more than hope."
The financial stakes for prolonged disruption remain high. JPMorgan analysts estimate that each additional month of oil supply disruption would add $7 to $8 to the price of Brent crude. If these geopolitical frictions extend to three months, monthly average prices could climb to around $114 a barrel.
Supply anxieties are also expanding beyond the Middle East. Russian forces recently struck three Ukrainian ports, targeting fuel reserves and loading infrastructure. Concurrently, Kazakhstan’s energy ministry reported temporary production cuts after suspected Ukrainian drone attacks forced the closure of its main Black Sea export terminal.
