Oil Prices Decline by 3% Amid Passage of Vessels Through Strait of Hormuz

Oil Prices Fall 3% as Vessels Sail Through Strait of Hormuz

Brent futures fell $2.93, or 2.8%, to settle at $100.21 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $5.21, or 5.3%, to settle at $93.50 on Monday.

The decline in oil prices was attributed to several factors, including near-record U.S. crude output bolstered by Venezuela imports and the upcoming release of oil from the U.S. Strategic Petroleum Reserve. Additionally, some traders were selling the April WTI front-month contract before its expiration on the New York Mercantile Exchange on March 20.

The Strait of Hormuz, a critical shipping waterway for a fifth of global oil and liquefied natural gas (LNG) supplies, has seen some vessels sail through, despite ongoing tensions in the region. Iran has allowed some Indian vessels to pass through the strait, and has asked India to release three tankers seized in February as part of talks seeking the safe passage of Indian-flagged or India-bound vessels.

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The International Energy Agency (IEA) has agreed to release 400 million barrels of oil from strategic stockpiles, with Executive Director Fatih Birol suggesting that more oil could be released "as and if needed". Member countries of the IEA could release more oil into the market to stem the rising costs caused by the Iran war.

Governments worldwide are trying to shield consumers from soaring energy costs as the disruption to global oil and gas supplies caused by the war ripples through economies. U.S. Treasury Secretary Scott Bessent has stated that the United States is "fine" with some Iranian, Indian, and Chinese ships going through the Strait of Hormuz for now, adding that any action to mitigate higher prices would depend on how long the war lasts.

The ongoing conflict in the Middle East has led to a surge in energy costs, with Brent futures up almost 40% since the U.S. and Israel attacked Iran on February 28. U.S. Energy Secretary Chris Wright has said that he expects an end to the war within "the next few weeks", with oil supplies rebounding and energy costs falling afterwards.