Global oil slips but Middle East fighting limits losses

Global oil prices slipped today - a day after the US launched an operation aimed at reopening the Strait of Hormuz to shipping, although exchanges of fire between the US and Iran limited the decline.

Brent crude futures eased $4.18, or 3.6%, to $110.26 a barrel this evening after settling up 5.8% yesterday. US West Texas Intermediate crude fell $4.34, or 4.1%, to $102.08, after gaining 4.4% in the previous session.

Maersk said the Alliance Fairfax, a US-flagged vehicle carrier, exited the Gulf via the strait accompanied by the US military.

"It shows that limited safe passage is possible under current conditions and helps chip away at some of the worst-case supply disruption fears," said Tim Waterer, chief market analyst at KCM Trade, in an email.

"However, it's still very much a one-off event rather than a full reopening," he added.

Iran launched new attacks in the Gulf yesterday to counter US attempts to take control of the Strait, which connects the Gulf to wider markets and typically carries oil and liquefied natural gas supply equal to about 20% of global demand every day.

Several merchant ships in the Gulf reported explosions or fires on Monday, and an oil port in the United Arab Emirates, which hosts a large US military base, was set ablaze by Iranian missiles.

The US military said yesterday it had destroyed six Iranian small boats, as well as cruise missiles and drones.

"Prices continue to trade in a highly volatile range, driven largely by ongoing tensions in the Strait of Hormuz," said Phillip Nova's senior market analyst Priyanka Sachdeva.

"While prices have eased slightly in recent sessions, this is not due to any real improvement in fundamentals, but rather a temporary relief after the US launched 'Project Freedom'," she added.