On a Thursday morning in mid-October, oil prices slipped back after a sharp rise, as the world's energy markets held two fears in tension at once: violence spreading across the Strait of Hormuz, and a quiet American willingness to loosen sanctions on the aging fleet of ships that carry sanctioned crude. It is an old pattern in human commerce, where scarcity and the means to relieve it arrive together, and where the people who move the barrels must decide whether a rising price is a warning or an opportunity. For now the market hesitates, unwilling to chase prices higher even as the evidence of
Oil Slips as Washington Weighs Easing Shadow Fleet Sanctions Amid Hormuz Attacks
Two ships sank near Hormuz in a single day, yet oil still slipped
Mark
Prices fell, but WTI had just hit a three-week high. What is the market actually reacting to?
Mimi
Two pulls at once. Attacks near Hormuz, including two ships sunk in 24 hours, push up. The prospect of easing sanctions on shadow fleet vessels pushes down.
Mark
What would easing actually mean?
Mimi
A US official said the talks centre on letting "legal oil" move on vessels that were previously sanctioned, to help ease prices. Those ships have carried oil from Russia, Iran and Venezuela.
Luke
But that's one unnamed official describing talks. Nothing has been decided, and we don't know what "legal oil" would mean in practice.
Mark
The inventory draw was 11.1 million barrels. Why didn't prices jump?
Mimi
Haitong Futures read it as caution: investors don't want to chase prices higher at these levels.
Luke
That's one firm's interpretation, and the 11.1 million figure is from sources citing API data. Official EIA numbers come later Thursday.
Mark
And supply?
Mimi
The IEA says Gulf exports are back to about 75 per cent of prewar levels, and Russian output rose slightly in September.
Luke
Worth remembering Russia is still 870,000 bpd below last year. Supply is recovering, not recovered.
The Pulse
- Brent slid to $104.67 and WTI to $94.07 after a three-week high, as traders gave back ground they had only just gained.
- Two vessels sank near the Strait of Hormuz after projectile strikes, and attacks there have surged over ten days amid the Iran war.
- Washington is weighing whether to ease sanctions on shadow fleet tankers so that 'legal oil' can move again and help pull prices down.
- A bullish US inventory draw of 11.1 million barrels failed to lift prices, leaving investors wary of buying at current levels.
- All eyes turn to the delayed EIA inventory report at 1600 GMT and to whether the sanctions relief becomes real or the Hormuz attacks accelerate further.
On a Thursday morning in mid-October, oil prices slipped back after a sharp rise, as the world's energy markets held two fears in tension at once: violence spreading across the Strait of Hormuz, and a quiet American willingness to loosen sanctions on the aging fleet of ships that carry sanctioned crude. It is an old pattern in human commerce, where scarcity and the means to relieve it arrive together, and where the people who move the barrels must decide whether a rising price is a warning or an opportunity. For now the market hesitates, unwilling to chase prices higher even as the evidence of disruption mounts.
Oil prices fell by more than a dollar early on Thursday, giving back part of the previous session's gains. Brent crude dropped to $104.67 a barrel and West Texas Intermediate to $94.07, after WTI had climbed to a three-week high the day before. That rally had been driven by Houthi attacks on Saudi Aramco's headquarters and by Iran's announcement that it was deploying new tactics against ships in the Strait of Hormuz.
The danger at sea has become concrete. Maritime officials reported that a container ship and a dry bulk carrier had both sunk near the strait within a day, each struck by projectiles in separate incidents. Attacks around the waterway have surged over the past ten days, and Iran says it is escalating in response to a US blockade of its ports and tougher sanctions introduced last month.
In Washington, a different lever is under consideration. The Trump administration is reportedly weighing easing sanctions on shadow fleet vessels that have carried oil from Russia, Iran and Venezuela, potentially allowing 'legal oil' to move on previously sanctioned ships. The goal is to bring prices down as the war has pushed freight costs to record highs.
Supply signals were mixed. The IEA reported Russian output rising in September, and Gulf exports recovering to roughly three-quarters of prewar levels. US inventory data showed a crude draw of 11.1 million barrels, far larger than expected, yet prices barely responded. Traders appear wary of chasing the market higher, and the next test arrives with the delayed EIA report, alongside the question of whether Washington acts and whether the attacks near Hormuz keep climbing.
Oil prices slipped by more than a dollar in early trade on Thursday, giving back part of the previous session's gains. By 0116 GMT, Brent crude futures had fallen $1.39, or 1.31 per cent, to $104.67 a barrel. US West Texas Intermediate futures were down $1.02, or 1.07 per cent, at $94.07.
The pullback followed a rally. 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 and keep oil prices elevated.
The violence at sea has been concrete. Maritime officials said on Wednesday that a container ship and a dry bulk carrier had both sunk near the strait within the past 24 hours, each hit by projectiles in separate incidents. Attacks around the waterway have surged over the past 10 days. Iran says it is stepping up its strikes in response to the US blockade of its ports and to tougher sanctions introduced last month.
Against that backdrop, Washington is weighing a different lever. The Iran war has disrupted shipping and pushed freight costs to record highs, and a US official said on Wednesday that the Trump administration is considering easing sanctions on so-called shadow fleet vessels. These ships have carried oil and petroleum products from countries including Russia, Iran and Venezuela. According to the official, the new talks centre on potentially allowing "legal oil" to move on vessels that were previously sanctioned. The aim is to help bring prices down.
Supply has also been a restraining force on the market. The International Energy Agency said on Wednesday that Russia's crude production rose by 65,000 barrels per day in September to 8.43 million bpd, though that is still 870,000 bpd lower than a year earlier. The agency also reported that crude exports from West Asian Gulf producers climbed by 4.4 million bpd in September, to roughly 75 per cent of prewar levels.
In the United States, market sources citing American Petroleum Institute data said crude and distillate inventories fell last week while gasoline stocks rose. Crude stocks dropped by 11.1 million barrels in the week ended October 9, a much larger draw than analysts polled by Reuters had expected.
Yet prices barely responded. Haitong Futures said in a note on Thursday that the failure to rise on such bullish news suggests investors are wary of chasing prices higher at current levels.
The next test comes at 12 p.m. EDT (1600 GMT), when official US Energy Information Administration inventory figures are due, delayed by a day because of the Columbus Day holiday on Monday. Beyond that, traders will be watching whether Washington actually moves to ease shadow fleet sanctions, and whether the attacks near Hormuz keep accelerating.
Notable Quotes
Despite the sharp inventory draw, oil prices barely reacted; investors appear cautious about chasing prices higher at current levels.— Haitong Futures, in a note on Thursday (paraphrased)
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