Crude oil prices remained on track for their steepest weekly decline in months on Friday as improving tanker traffic through the Strait of Hormuz continued to ease concerns over supply disruptions, prompting traders to unwind much of the geopolitical premium built into the market during the recent Middle East conflict.
As at the time of writing 6:35 a.m. (WAT), Brent crude traded at $73.77 per barrel, down 1.98 per cent, while West Texas Intermediate (WTI) slipped 2.07 per cent to $70.43 per barrel. The latest sell-off leaves both benchmarks on course for a weekly loss of about 7 per cent, reversing much of the rally that briefly lifted Brent above the $80 per barrel threshold.
The sharp decline reflects growing confidence that crude exports from the Persian Gulf will continue largely uninterrupted following a strong rebound in tanker movements through the Strait of Hormuz, a strategic chokepoint that handles nearly one-fifth of global oil shipments. The recovery has shifted market attention away from geopolitical risks and back to underlying supply and demand fundamentals.
Despite the improving outlook, analysts at ING warned that the recovery in shipping activity remains incomplete. According to the bank, most of the recent vessel movements have been outbound tankers leaving the Gulf after being delayed by the conflict, while inbound traffic remains significantly below normal levels. The analysts also cautioned that Iran's reported strike on a commercial vessel, coupled with the International Maritime Organisation's suspension of its evacuation plan for stranded ships, could temper the pace of recovery.
Reuters shipping data further showed that overall vessel traffic through the Strait of Hormuz remains well below pre-conflict levels, when an average of about 125 ships transited the waterway daily. This suggests that while market sentiment has improved considerably, the region has yet to return to full operational normalcy.
Meanwhile, the market is also monitoring developments in Venezuela, where powerful earthquakes earlier this week triggered widespread power outages. Although the country's oil infrastructure escaped major damage, analysts believe prolonged electricity disruptions could affect crude production and provide some support to global prices if output declines.
For Nigeria, the retreat in crude prices presents both opportunities and challenges. Lower international benchmarks could support further reductions in domestic prices of petrol, diesel and aviation fuel, particularly as Dengote Refinery and private depots continue to adjust ex-depot prices. However, sustained weakness in the oil market could erode the federal government export earnings, weaken fiscal revenues and reduce foreign exchange inflows at a time when crude oil remains Nigeria's largest source of external revenue.
With the geopolitical risk premium rapidly fading, market participants are now closely watching tanker movements through the Strait of Hormuz, production trends among major exporters and broader global demand indicators. Together, these factors are expected to shape the direction of crude oil prices in the weeks ahead.