Oil prices steadied on Tuesday after a tanker was reportedly struck by a projectile near the Strait of Hormuz, highlighting the risks that continue to hang over one of the world's most important energy shipping routes. Brent crude held above $72 a barrel after a marginal decline in the previous session, while West Texas Intermediate traded near $69.
A tanker travelling south was hit on its port side about eight nautical miles east of Limah in Oman, according to UK Maritime Trade Operations. The strike caused a fire, though no casualties were reported.
The incident puts the focus back on security in the Strait of Hormuz, the narrow waterway connecting major Persian Gulf oil producers with global markets. The route has partially reopened after the US-Iran war had brought traffic to a near standstill. At least eight Japan-linked vessels have recently crossed the strait in a convoy, but overall traffic remains below pre-conflict levels.
Oil Erases War Premium
Crude prices fell 30% in the second quarter after Washington and Tehran agreed to an interim peace deal, easing fears of a major disruption to Middle East oil supplies.
Brent has since given up the entire war premium built into prices in recent months. Goldman Sachs and Morgan Stanley are among the banks warning that the market could face a renewed supply glut.
Those concerns intensified after Saudi Aramco said it would cut the price of its flagship Arab Light crude for Asian buyers by $11 a barrel next month, putting it at a $1.50 discount to the regional benchmark. The last two occasions on which the grade was sold at a discount came during the oil price wars of 2020 and 2015.
The move followed a decision by OPEC+ members, including Saudi Arabia, to raise production quotas for next month. While the additional barrels may not immediately reach the market, the decision signals a push to increase supply as conditions normalise.
Investors will next look to the US Energy Information Administration's Short-Term Energy Outlook for further clues on supply. Last month, the agency raised its 2027 forecast for US crude production by 220,000 barrels a day to 13.83 million barrels a day.
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