Oil Price Today (July 24): Crude oil dips below $100 but up 13% this week as supply tensions mount. $120 per barrel possible?
Crude oil price on July 24
Brent futures fell 81 cents, or 1%, to $99.68 a barrel at 0126 GMT, but were still set for a 13.5% rise this week. West Texas Intermediate (WTI) futures dropped 70 cents, or 0.76%, to $91.49 a barrel and were on track for a 11% weekly gain.
On Thursday, Brent settled 7% higher and WTI rose 6.2%. It was the first time since May that Brent closed above $100 a barrel, after Iran-aligned Houthis said they had attacked two Saudi oil tankers in the Red Sea.
The attacks fuelled concerns that the Bab el-Mandeb shipping route could be closed. The waterway connects the Red Sea with the Indian Ocean and is the world’s second most important oil transit channel after the Strait of Hormuz. U.S. President Donald Trump also vowed to “hold Iran responsible” for any further attacks.
Also read:Houthis claim attacks on Saudi tankers in Red Sea, raising risk of new chokepoint in Iran war
The Iran-aligned Houthis said on Monday that they were imposing a naval blockade on Saudi Arabia. Saudi Arabia had been using pipelines to divert its oil shipments and avoid the closure of the Strait of Hormuz by Iran.
Iran had been pushing the Houthis to shut the Bab el-Mandeb gateway to the Red Sea if the U.S. continued attacks on Iranian power infrastructure. The move came after an interim truce between the U.S. and Iran collapsed two weeks ago.
Separately, Kazakhstan’s energy ministry said on Thursday that oil companies had temporarily cut production after suspected Ukrainian drone attacks led to the closure of the country’s main Black Sea export terminal. The Caspian Pipeline Consortium had stopped receiving oil from Kazakhstan after suspending loadings following attacks on tankers at the terminal, according to industry sources cited on Tuesday. The route carries about 2% of global daily crude supply.
$120 in sight?
Goldman Sachs has warned that Brent crude could climb to $120 a barrel if disruptions to shipping through the Strait of Hormuz, the world’s most important oil transit route, continue. Its base case remains that tensions in the Middle East will eventually ease.
If the conflict in the region subsides, Goldman Sachs expects Brent to average $80 a barrel in the fourth quarter and $75 next year. However, analysts said the risks to these forecasts remain “tilted to the upside”, citing the possibility of disruptions to shipping through both the Strait of Hormuz and the Red Sea.
Oil markets have seen renewed volatility this month, with Brent rising back above $91 a barrel as fighting between the U.S. and Iran intensified. The threat from Iran-backed Houthi rebels in Yemen to block Saudi oil shipments has added to concerns. The Red Sea has also gained importance for Persian Gulf crude cargoes affected by disruptions, allowing them to continue reaching buyers.
Anindya Banerjee, Head of Commodity Research at Kotak Securities, said crude oil prices were once again being driven by geopolitical risks. “Any strike on major Gulf export infrastructure could force a retest of $95-100 and beyond,” he said.
Read more: US will destroy ‘one bridge or power plant’ for every attack on ships in Strait of Hormuz, warns Trump
Banerjee said the market was now focusing less on military strikes and more on the weakening prospects of a diplomatic solution. Tehran has set new conditions for restarting negotiations, he said, while each new development is delaying the return of normal tanker traffic through the Strait of Hormuz. Shipping activity through the waterway has already remained well below pre-war levels.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
