Crude Oil Prices Decline as Supply Outlook Improves
Crude oil prices declined on Friday after US President Donald Trump said the Strait of Hormuz remained open and tankers were continuing to carry oil, boosting expectations of higher supply.
International benchmark Brent crude futures for November delivery traded at $87.94 per barrel, down 0.7% from the previous close of $88.52. US benchmark West Texas Intermediate (WTI) crude futures for October delivery traded at $82.79 per barrel, down 0.9% from $83.53.
Brent crude futures had increased nearly 2% on Thursday after reports that Venezuela was considering leaving the Organisation of the Petroleum Exporting Countries (OPEC), raising concerns about the impact on production coordination within the group.
International media reported that Venezuela’s possible withdrawal had also been discussed with US officials, although no final decision had been made. An exit could further weaken OPEC’s influence over global crude markets and add uncertainty to oil prices.
The reports come as Washington has been deepening ties with Caracas and negotiating over long-term access to Venezuela’s oil reserves. Venezuela produced around 1.12 million barrels per day of crude in July, according to International Energy Agency data.
Meanwhile, Trump’s comments that the Strait of Hormuz was open and under US control put downward pressure on oil prices, as he said 24 tankers had passed through the waterway overnight and that tanker traffic was continuing.
Trump’s comments eased concerns that disruptions to traffic could further tighten global supplies however were partly offset by tough rhetoric from Iran.
Iran’s Supreme National Security Council Secretary Mohsen Rezaei said on Thursday that Tehran would target US military and economic interests if Washington continued its naval blockade, warning that any action against Iran would be met with a “historic” blow.
He also said the Strait of Hormuz would only be reopened after the United States took practical steps to meet Iran’s demands.
Oil prices also came under pressure from expectations that the US Federal Reserve may keep monetary policy tighter for longer.
The personal consumption expenditures (PCE) price index rose 0.2% month-on-month in July, exceeding market expectations and raising concerns that inflationary pressures remain persistent.
Markets were pricing in a 66% chance that the Fed would leave rates unchanged next month and a 62% probability of a 25-basis-point rate hike in October.
Higher interest rates can slow economic activity and oil demand, while a stronger dollar makes dollar-denominated crude more expensive for buyers using other currencies.
Oil Prices Decline as U.S. Changes Plan on How to Fight Iran
