Oil Prices Head for Second Weekly Decline as US Maintains Iran Blockade

PERTH, Nov 13: International crude oil prices were heading towards their second consecutive weekly decline on Friday as expectations of reduced military escalation in the Middle East outweighed concerns about continuing disruptions to energy shipments from the region.

Brent crude futures remained largely unchanged at USD 95.41 per barrel, while US West Texas Intermediate (WTI) crude slipped 20 cents, or 0.25 per cent, to USD 88.52 per barrel during early trading.

The latest movement followed a volatile week in global energy markets, with investors closely monitoring developments surrounding the conflict involving the United States, Israel and Iran, as well as attacks targeting commercial shipping and regional energy infrastructure.

Brent crude was on track to decline approximately 2.4 per cent during the week, following a substantial 16 per cent fall in the previous week. WTI was also expected to register a weekly decline of around 2.5 per cent after losing 13 per cent in the preceding week.

The consecutive declines indicate that investors are gradually reducing the geopolitical risk premium previously incorporated into oil prices.

US President Donald Trump’s decision to maintain the blockade on Iranian oil shipments and trade has become an important factor influencing market sentiment.

Trump recently indicated that Washington did not require an agreement with Tehran to bring the conflict to an end, suggesting that existing economic and trade restrictions would remain in place.

Although the blockade continues to restrict Iranian commercial activity, expectations that the confrontation may not immediately escalate into a broader military conflict have reduced concerns about an abrupt interruption in regional oil supplies.

Chris Brankin, global adviser at Melbourne-based brokerage MiTrade, said the recent decline reflected a balanced assessment of the risks facing the global oil market.

He observed that prices had recovered slightly during the week but lacked strong momentum as traders continued to monitor developments in the Middle East.

Despite the recent weakness, uncertainty surrounding energy transportation remains a significant concern for international markets.

The Strait of Hormuz, one of the world’s most strategically important maritime routes, remains particularly vulnerable to geopolitical tensions.

The narrow waterway connects the Persian Gulf with the Gulf of Oman and provides a crucial passage for crude oil exports from major Middle Eastern producers.

Any prolonged disruption could affect supplies to major importing countries across Asia and other regions, potentially triggering sharp increases in international energy prices.

Iran’s military said on Thursday that four oil tankers had been struck by explosions in the Strait of Hormuz after allegedly ignoring warnings. The claims could not immediately be independently verified by Reuters.

The reports renewed concerns about the security of vessels operating in the region, particularly as international shipping companies continue to assess the risks associated with transporting crude oil through the Gulf.

Commercial tanker operations have already faced uncertainty due to military activity, security warnings and disruptions to established shipping routes.

The situation has created additional challenges for energy traders, insurers and shipping operators, who must account for changing security conditions while planning cargo movements.

Attacks on Saudi energy infrastructure have added another dimension to the uncertainty.

Yemen’s Iran-aligned Houthi group claimed on Thursday that it had targeted a pumping station connected to Saudi Arabia’s East-West oil pipeline, an oil facility in the Red Sea city of Yanbu and an Aramco building in Riyadh.

The Saudi East-West pipeline is strategically important because it allows the kingdom to transport crude oil towards the Red Sea, providing an alternative export route that reduces dependence on shipments through the Strait of Hormuz.

Any damage to its infrastructure could create additional pressure on regional supply arrangements and increase concerns among international energy buyers.

Saudi Arabia remains one of the world’s leading oil producers, making the security of its production and transportation facilities particularly important for global markets.

However, despite the continuing geopolitical risks, developments in the United States have provided a major reason for the recent decline in crude prices.

The US Energy Information Administration reported a substantial increase in domestic crude inventories during the week ended November 6.

Commercial crude stockpiles rose by 4.7 million barrels to 414.4 million barrels, considerably higher than the 1.1 million-barrel decline expected by analysts in a Reuters poll.

The unexpected increase suggested that domestic supply conditions were more comfortable than previously anticipated.

Rising inventories generally indicate that available supplies are exceeding immediate consumption requirements or that imports and domestic production are increasing faster than refinery demand.

The latest figures also reflected softer demand for refined petroleum products and a rise in crude oil imports.

For international markets, higher US inventories can create downward pressure on prices by reinforcing concerns about an adequate supply environment.

The development has become particularly important because the oil market is currently balancing geopolitical uncertainty against signs of weaker demand and increasing availability.

Investors are also assessing the outlook for global economic activity, which plays an important role in determining future energy consumption.

Oil demand is closely linked to industrial production, transportation, aviation, manufacturing and electricity generation.

A slowdown in major economies can reduce consumption expectations, while stronger industrial activity and increased mobility generally support higher demand.

The recent decline in prices has therefore reflected several factors rather than a single development.

On one side, the possibility of a wider disruption to Middle Eastern oil exports continues to support prices. On the other, higher US inventories and expectations of more stable regional supplies have reduced the urgency among buyers to secure additional crude.

For oil-importing countries such as India, the recent movement could provide some relief if lower international prices are sustained.

India imports a substantial proportion of its crude oil requirements, making domestic fuel costs and the country’s import expenditure sensitive to changes in global energy markets.

A prolonged decline in crude prices could help reduce the country’s oil import bill, improve its external trade position and ease pressure on the current account deficit.

Lower energy costs could also benefit several domestic industries, including aviation, transportation, logistics, chemicals, paints and manufacturing.

Fuel is a major operating expense for airlines and road transport companies. A reduction in crude prices can help moderate aviation turbine fuel and diesel-related expenses, depending on domestic pricing structures and currency movements.

Manufacturing businesses may also benefit from lower costs associated with petroleum-based raw materials, packaging and transportation.

However, the impact on Indian consumers is not automatic.

Domestic petrol and diesel prices are influenced by international crude benchmarks, refining margins, currency exchange rates, taxation and decisions taken by oil marketing companies.

A weaker rupee can partially offset the benefits of lower international oil prices because Indian refiners must spend more domestic currency to purchase crude priced in US dollars.

Government taxation and the pricing policies of oil marketing companies also influence the extent to which changes in international benchmarks are reflected at retail fuel stations.

Consequently, even if global crude prices continue declining, consumers may not immediately experience an equivalent reduction in petrol and diesel prices.

The situation also presents challenges for major oil-producing countries.

A sustained decline in international benchmarks can reduce export revenues and place pressure on government budgets in economies that depend heavily on petroleum sales.

Countries with significant fiscal dependence on energy exports may need to reassess spending plans if lower prices continue for an extended period.

At the same time, energy companies must balance production decisions against changing demand expectations and the possibility of future supply disruptions.

OPEC and its partner producers will remain important participants in determining the direction of global crude markets.

Their production policies can influence the availability of oil and affect the balance between supply and consumption.

If prices decline substantially, producers could consider adjusting output to support market stability. However, decisions regarding production levels also depend on individual countries’ economic requirements and their assessment of future demand.

The ongoing uncertainty surrounding the Middle East makes the outlook particularly difficult.

Even if diplomatic efforts reduce the likelihood of wider military escalation, attacks on shipping and energy infrastructure could quickly change market expectations.

The Strait of Hormuz remains a central concern because of its importance to international crude oil transportation.

Any significant interruption could affect supplies to Asian economies that rely heavily on Middle Eastern energy imports.

China, India, Japan and South Korea are among the major Asian economies with substantial exposure to developments in the region.

For these countries, energy security is closely connected to industrial competitiveness, inflation management and economic growth.

Governments and energy companies have therefore continued to focus on diversifying supply sources, strengthening strategic reserves and developing alternative transportation arrangements.

India, in particular, has been seeking to maintain diversified crude procurement to reduce its dependence on any single geographical source.

The country’s energy requirements are expected to increase as industrial activity, urbanisation, transportation demand and electricity consumption expand.

Consequently, international oil price fluctuations remain an important factor in India’s economic planning.

Lower crude prices could also help moderate inflationary pressures by reducing transportation and production expenses across different sectors.

However, the overall benefit will depend on how long the decline continues and whether other imported commodities become more expensive.

Financial markets are likely to remain sensitive to developments surrounding the US blockade, shipping security and the condition of Saudi energy infrastructure.

Traders will also monitor subsequent inventory reports from the United States to determine whether the latest increase represents a temporary development or a broader trend of growing supply.

Any fresh attacks on tankers or major energy facilities could reverse the recent decline, while further evidence of weakening demand and rising inventories may keep prices under pressure.

For now, international crude benchmarks are heading towards another weekly loss, suggesting that traders are increasingly weighing supply availability and economic conditions against geopolitical risks.

The direction of the oil market in the coming weeks will depend heavily on developments in the Middle East, the security of important shipping corridors and the ability of major producers to maintain a stable balance between global supply and demand.