HOUSTON :Oil prices slipped on Friday as the U.S. imposed new Iran-related sanctions marking a diplomatic approach that fed hopes of a negotiated agreement, a day after President Donald Trump said he might take two weeks to decide U.S. involvement in the Israel-Iran conflict.
Brent crude futures were down $2.27, or 2.9 per cent, to $76.58 a barrel by 11:48 a.m. EDT.
U.S. West Texas Intermediate crude for July – which did not settle on Thursday as it was a U.S. holiday and expires on Friday – was down 21 cents or 0.3 per cent at $74.93.
The more liquid August contract was down around 0.1 per cent, or 5 cents, to $73.45.
Brent was on track to rise 3.2 per cent on the week, while front-month U.S. crude futures were set to increase by 2.7 per cent.
President Donald Trump’s administration has issued fresh Iran-related sanctions, including on two entities based in Hong Kong, and counter-terrorism-related sanctions, according to a notice posted to the U.S. Treasury Department website.
The sanctions target at least 20 entities, five individuals and three vessels, according to Treasury’s Office of Foreign Asset Control.
“Those sanctions are cutting both ways, they may be part of a broader negotiation approach towards Iran. The fact they are undertaking this is a signal they are trying to resolve this outside of conflict,” said John Kilduff, partner at Again Capital in New York.
Prices jumped almost 3 per cent on Thursday after Israel bombed nuclear targets in Iran, while Iran – OPEC’s third-largest producer – fired missiles and drones at Israel. Neither side showed any sign of backing down in the week-old war.
Brent prices retreated after the White House said President Donald Trump would decide whether the United States would get involved in the Israel-Iran conflict in the next two weeks.
“Although a major escalation is yet to occur, risks to supply from the region remain high, still hinging upon the potential for U.S. involvement,” said Russell Shor, senior market analyst at Tradu.com.
Meanwhile, Israel seeks genuine efforts on Iran’s nuclear capabilities from Friday’s meeting between European and Iranian ministers, not just another round of talks, Israel’s UN ambassador said.
“However, while Israel and Iran carry on pounding away at each other, there can always be an unintended action that escalates the conflict and touches upon oil infrastructure,” PVM analyst John Evans said.
Iran has in the past threatened to close the Strait of Hormuz, a vital route for Middle East oil exports.
However, oil exports so far have not been disrupted and there is no shortage of supply, said Giovanni Staunovo, an analyst at UBS.
“The direction of oil prices from here will depend on whether there are supply disruptions.”
An escalation of the conflict in such a way that Israel attacks export infrastructure or Iran disrupts shipping through the strait could lead to $100 per barrel of oil being a reality, said Panmure Liberum analyst Ashley Kelty.
Elsewhere, the EU has abandoned its proposal to lower the price cap on Russian oil to $45, Bloomberg reported.
