Oil prices fell more than 1% on Thursday. Reuters reported that Brent crude futures dropped $1.64, or 1.6%, to $104.42 a barrel, while US West Texas Intermediate crude fell 98 cents, or 1%, to $94.11, reversing the previous session's gains.
Investors weighed risks to supply from attacks on shipping through the Strait of Hormuz against US efforts to cut shipping costs by easing sanctions on vessels. A US official said on Wednesday that the Trump administration is considering easing sanctions on so-called shadow-fleet vessels that carry oil and fuel from countries including Russia, Iran and Venezuela, as the Iran war has pushed freight costs to record highs, according to Reuters.
WTI had climbed to a three-week high in the prior session after the Houthis attacked Saudi Aramco's headquarters and Iran said it was deploying new tactics to target ships in the Strait of Hormuz. Maritime officials said a container ship and a dry bulk carrier sank near the strait within 24 hours after being hit by projectiles in separate incidents.
CNBC reported that traders were also digesting the International Energy Agency's monthly report, which warned that constraints in diesel markets could last well into next year and that fresh attacks on Saudi Arabia threaten to derail a recovery in supply. Firas Bechwaty of trading platform ICM said the lack of US-Iran diplomatic progress left little immediate prospect of the waterway fully reopening, but Saudi crude reaching buyers via alternative routes and emergency stock releases by IEA members were preventing a sharp price spike.
The swings matter for oil importers such as Pakistan, where domestic fuel prices are set with reference to international rates.