Oil falls but heads for strong weekly gains amid supply disruptions

Oil prices fell on Friday but remain on track to gain more than 7% this week, while US diesel prices have reached a record high as attacks on key shipping routes in the Middle East fuel concerns that supply disruptions could persist for an extended period.

In trading, Brent crude futures fell $3.37, or 3.1%, to $104.26 a barrel by 11:41 GMT, while US West Texas Intermediate crude declined $2.99, or 2.9%, to $99.49 a barrel. Both benchmarks had earlier climbed to their highest levels since mid-May.

The benchmarks reversed earlier gains after the Financial Times reported that Middle Eastern foreign ministers were seeking to reach a temporary agreement with Iran to regulate shipping through the Strait of Hormuz.

Brent and WTI had both risen more than 6% on Thursday.

Shipping disruptions threaten oil supplies

Iran said it attacked 10 vessels near the Strait of Hormuz on Wednesday after the United States targeted five Iranian oil tankers. Iran’s Revolutionary Guards said they would escalate their response to any further attacks.

Preliminary vessel-tracking data released on Friday showed that the number of ships passing through the Strait of Hormuz fell to seven on Thursday from 11 the previous day, well below the 10-day average of 15 vessels.

Before the war with Iran began in late February, the strait carried around one-fifth of the world’s daily oil and liquefied natural gas supplies.

Iran-aligned Houthis took control of Yemen’s Mokha port on Thursday, posing an additional threat to shipping in the Red Sea, while maritime traffic in the Gulf remains constrained through the Strait of Hormuz as tanker attacks in the region have intensified in recent days.

Analysts said attacks from Yemen on Saudi energy facilities represent an escalation beyond Iran and the Strait of Hormuz, raising concerns that supply disruptions could persist across the broader region.

The International Energy Agency said global oil supply and demand will decline this year by more than previously expected, as the continued lack of progress toward ending the war with Iran delays the return of normal oil flows from the Middle East until 2027.

Supply disruptions push fuel prices higher

Oil supply disruptions caused by the war with Iran, combined with Ukrainian attacks on Russian refineries, pushed the average US diesel price above $6 a gallon for the first time on record on Thursday.

Commerzbank raised its year-end Brent crude forecast to $85 a barrel from $75. It also increased its jet fuel price forecast to $1,230 per metric ton from $980 and its diesel forecast to $1,200 per metric ton from $950.

In China, the National Development and Reform Commission said on Friday that it would raise maximum retail prices for gasoline and diesel from September 12 by 260 yuan ($38.76) and 250 yuan per metric ton, respectively.