US issues 30-day license for nations to buy Russian oil, easing global supply concerns; Oil prices dip

Oil prices experienced a dip on Friday morning, following the US granting a 30-day license allowing countries to purchase Russian oil and petroleum products stranded at sea, alleviating concerns over supply disruptions.

As a result, Brent crude futures fell by 71 cents, or 0.71%, to $99.75 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped 88 cents, or 0.92%, to $94.85.

The new US measure comes as part of efforts to stabilise the global energy market, which has been shaken by ongoing tensions in Iran. Treasury Secretary Scott Bessent explained that the license was issued to ease market fears, while also stressing that the critical issue of stabilising the Strait of Hormuz remained unresolved.

The announcement coincided with a significant move by the U.S. Energy Department to release 172 million barrels of oil from the Strategic Petroleum Reserve. This decision was made in response to surging oil prices, further exacerbated by the Iran conflict. The release is part of a coordinated effort with the International Energy Agency (IEA), which has agreed to release a record 400 million barrels from global strategic reserves.

However, any relief provided by this move was short-lived, as new tensions in the Middle East threatened to worsen supply conditions. IG analyst Tony Sycamore noted that the brief drop in oil prices was overshadowed by escalating risks in the region.

The previous day, both Brent and WTI prices surged by more than 9%, hitting their highest levels since August 2022. The spike followed warnings from Iran's new supreme leader, Mojtaba Khamenei, who indicated that Iran would continue to block the Strait of Hormuz to leverage its position against the U.S. and Israel.

The geopolitical tensions intensified on Thursday as two fuel tankers in Iraqi waters were struck by explosive-laden Iranian boats. This led to a complete halt in operations at Iraq’s oil ports. Meanwhile, Oman took precautionary steps by moving all vessels out of its main oil export terminal at Mina Al Fahal, just outside the Strait.

In a bid to mitigate further risks, U.S. Treasury Secretary Bessent suggested that the U.S. Navy, potentially with the help of international partners, could escort vessels through the Strait of Hormuz when feasible.

On the ground, Saudi Arabia has been rerouting tankers to the Red Sea, using its East-West pipeline to bypass the Strait, paying a premium for the route. Meanwhile, Iran is selectively allowing a few tankers per day to pass through, primarily to China, which helps maintain economic flow and political support from Beijing.

(With inputs from Reuters)