SINGAPORE: Oil prices tumbled 5% on Monday after the United States and Iran paused strikes over the weekend, raising hopes for a diplomatic solution that could de-escalate the conflict and allow shipping to resume through the Strait of Hormuz.
Brent crude futures fell $4.89, or 5.05%, to $91.89 a barrel by 0009 GMT, after briefly slipping below the key support level of $90 earlier in the session. U.S. West Texas Intermediate crude was at $84.64 a barrel, down $4.67, or 5.23%.
Both contracts are trading at their lowest levels in nearly a week after rising for the past three weeks. Brent had reached $100 per barrel as the conflict, which reduced oil shipments via the Strait of Hormuz, spilled over to the Red Sea, hindering exports from the world’s top exporter, Saudi Arabia, via the Bab el-Mandeb strait to Asia.
The U.S. ambassador to the United Nations, Mike Waltz, told “Fox News Sunday” and other U.S. media that President Donald Trump had decided to pause U.S. attacks to allow more time for diplomacy.
“Hopes are rising that a genuine diplomatic path may be opening,” IG markets analyst Tony Sycamore said in a note. “A return to the 14-point MOU (memorandum of understanding) with a little more clarity around control of the Strait of Hormuz would be a solid starting point.”
Despite the pause in attacks, fewer than 10 commodity vessels passed through the Strait of Hormuz daily during the weekend, shipping data from Kpler showed Monday. Ship traffic through the Bab el-Mandeb strait fell on Sunday after Yemeni Houthis attacked Saudi oil installations along the Red Sea coast, although a third Chinese supertanker exited via the Bab el-Mandeb.
“Any rebound in flows through the Strait of Hormuz is likely to prove slow and partial, as many shippers remain wary and will want greater confidence in their safety before they bring more empty ships into the Strait,” MST Marquee analyst Saul Kavonic said.
Eleven commodity vessels passed through the Bab el-Mandeb strait on Sunday, the lowest level in months, the data showed.
Red Sea traffic has been disrupted off the coast of Yemen since last week by the Tehran-aligned Houthis, who want to blockade Saudi exports, expanding the U.S.-Iran conflict that has already choked oil supply through the Strait of Hormuz.
The shipping disruption caused prices of physical crude cargoes in the Middle East, Europe and Africa to jump to two-month highs last week.
Seven of the vessels that passed through Bab el-Mandeb were oil tankers, with three of them entering the Red Sea. Two are very large crude carriers heading to the port of Yanbu to load Saudi crude, while the third is a Russian-linked ship, the data showed.
The four vessels that exited the Red Sea on Sunday included the Hong Kong-flagged VLCC New Explorer, carrying 2 million barrels of Saudi and Emirati crude for eastern China’s Ningbo port; a tanker carrying 1 million barrels of Russian crude for China; and a tanker with about 750,000 barrels of Saudi crude onboard for Pakistan, the data showed.
Another Hong Kong-flagged VLCC, New Pearl, carrying 2 million barrels of Saudi crude, is exiting the Red Sea via the Bab el-Mandeb strait for eastern China’s Zhoushan port, the fourth Chinese supertanker to leave since the Houthis declared a naval blockade. Associated Maritime Hong Kong, the manager for New Explorer and New Pearl, did not immediately respond to a request for comment outside office hours.
Houthi military spokesperson Yahya Saree said the group struck sites belonging to Saudi state oil company Aramco in the cities of Jizan and Yanbu on Saturday.
Hormuz traffic
Fewer than 10 commodity vessels passed through the Strait of Hormuz daily over the weekend, even though the U.S. and Iran have paused strikes in the Middle East, shipping data from Kpler showed.
Seven vessels transited on Sunday, including three Iranian-linked oil products tankers that exited the Strait, the data showed. On Saturday, only three vessels passed through with their transponders switched off, including a VLCC heading to Qatar to load oil, a liquefied petroleum gas tanker going to the Ruwais port in the United Arab Emirates to load a cargo, and a tanker carrying Qatari naphtha heading to Japan.
On Friday, seven vessels passed, mostly exiting the Gulf, including two VLCCs carrying crude from Iraq and the UAE and a tanker carrying fuel oil.
