Oil prices headed downwars on Wednesday, as geopolitical tensions following an attack on an oil tanker off the coast of Oman were offset by concerns over rising COVID-19 cases in China capped gains.
Brent crude futures fell $1.17, or 1.25%, to $92.69 U.S. a barrel, and U.S. West Texas Intermediate (WTI) crude futures fell $1.59, or 1.83%, to $85.33 a barrel. Both benchmarks had fallen more than a dollar earlier in the session.
Both benchmarks rose sharply after a tanker was hit off the coast of Oman on Tuesday, sustaining minor damage, highlighting the geopolitical risks in the world’s busiest routes for oil shipments.
Three maritime sources told Reuters that a drone was suspected to have attacked the tanker. An Israeli official said Iran was responsible for the attack, using a Shahed-136 drone, the type it has been supplying to Russia for use in Ukraine.
Oil prices settled higher on Tuesday after oil supply to parts of Europe via a section of the Druzhba pipeline was temporarily suspended, according to oil pipeline operators in Hungary and Slovakia.
The disruption was concurrent with an explosion in eastern Poland near the Ukraine border that killed two people and raised the possibility that the Russian-Ukraine conflict could spill over.
In China, rising COVID-19 cases weighed on sentiment after an easing of virus restrictions this week.
Meantime, the International Energy Agency forecast demand growth to slow to 1.6 million bpd in 2023 from 2.1 million bpd this year.
