The oil market closed lower on Friday after the United States imposed new Iran-related sanctions, marking a diplomatic approach that raised the possibility of a negotiated agreement, with Brent losing $1.84 or 2.33 per cent to trade at $77.01 per barrel and the US West Texas Intermediate (WTI) crude declining by 21 cents or 0.28 per cent to quote at $74.93 per barrel.
The administration of President Donald Trump issued fresh Iran-related sanctions, including on two entities based in Hong Kong, and counter-terrorism-related sanctions a day after he said it could take two weeks to decide the involvement of his country in the Israel-Iran conflict.
According to a notice, an escalation of the conflict in such a way that Israel attacks export infrastructure or Iran disrupts shipping through the strait could lead to oil at being traded at $100 a barrel.
In the last weeks, Israel bombed nuclear targets in Iran, while Iran, which is the third-largest producer under the Organisation of the Petroleum Exporting Countries (OPEC), fired missiles and drones at Israel as neither side showed any sign of backing down.
As the conflict entered a second week, there was no indication that either side was looking to stand down, and that kept traders on edge.
Although oil exports so far have not been disrupted and there is no shortage of supply, traders will continue to watch possible threats to close the Strait of Hormuz, a vital route for Middle East oil exports.
Each day, about 18 to 21 million barrels of oil and petroleum products move through the strait, roughly one-fifth of the world’s oil supply.
Market analysts warned that an escalation of the conflict in such a way that Israel attacks export infrastructure or Iran disrupts shipping through the strait could lead to oil selling at $100 – $130 a barrel.
Elsewhere, the European Union has abandoned its proposal to lower the price cap on Russian oil to $45, to stop it from funding its three year aggression against Ukraine.
According to energy services firm, Baker Hughes, US energy firms this week cut the number of oil and natural gas rigs operating for an eighth week in a row for the first time since September 2023. The oil and gas rig count, an early indicator of future output, fell by one to 554 in the week to June 20, the lowest since November 2021.