Crude oil prices muted as market awaits US-Iran talks in Islamabad

New Delhi: Global crude oil prices pared early gains on Friday, and were muted as traders awaited the progress on the weekend's ceasefire talks between the warring US and Iran.

Crude oil prices had risen nearly 1% in Asia's morning trade due to Iran's attacks on Saudi Arabia’s East-West pipeline and crude-producing facilities hit output.

India's crude basket price was at $115.52 on Thursday, down from $120.28 per barrel on Wednesday. This represents a derived basket comprising sweet grade (Brent dated) and sour grade (Oman & Dubai average) crude oil imported by Indian refineries.

Saudi Arabia's energy ministry had on Thursday said the strikes had clipped the kingdom’s oil ouptut capacity by about 600,000 barrels per day (bpd)—7.5% of its current 8 million bpd output) and cut flows through its East-West pipeline by roughly 700,000 bpd, about 10% of the capacity.

US-Iran talks on easing the war, which had started on 28 February, will take place in Islamabad, Pakistan, on Saturday. Although, the two-week ceasefire that paved the way for the talks holds for now, concerns are rife over a derailment due to Israel's relentless strikes on Lebanon.

Strategic bypass

The East-West Pipeline is a 1,200-km-long, dual-pipe system in Saudi Arabia that carries crude oil from the Eastern Province to the Red Sea port of Yanbu, allowing exports to bypass the Strait of Hormuz. It has a capacity of up to 7 million barrels per day.

For perspective, the pipeline was among the planned alternative routes for bringing in crude from Saudi Arabia via the Red Sea, as the crucial Strait of Hormuz was blocked.

At 5.50 pm, the June contract of Brent crude traded at $95.82 a barrel, 0.1% lower from its previous close, while the May contract of West Texas Intermediate was up 0.6% at $97.93 a barrel.

Hormuz tensions

Concerns over closure of the Strait of Hormuz, a key pathway for energy cargoes, by Iran amid a fragile ceasefire have kept investors on the edge.

Following the ceasefire announcement 8 April by US President Donald Trump, crude prices had fallen about 15% to sub-$100 a barrel for the first time in over a month. However, after Israel's attacks on Lebanon, Iran has threatened to again block the strait if attacks on Lebanon continued.

Sultan Al Jaber, the chief executive officer of the Abu Dhabi National Oil Company (Adnoc), on Thursday said passage through the crucial waterway was subject to “permission, conditions and political leverage” by Iran and the energy security and global economic stability depended on the strait being opened “fully, unconditionally and without restriction”.

“The weaponization of this vital waterway, in any form, cannot stand. This would set a dangerous precedent for the world–undermining the principle of freedom of navigation that underpins global trade and, ultimately, the stability of the global economy," Jaber said on LinkedIn.

“An estimated 230 vessels sit loaded with oil and ready to sail. They, and every vessel that follows, must be free to navigate this corridor without condition. No country has a legitimate right to determine who may pass and under what terms,” he wrote.

India-Qatar meet

Amid the energy security concerns, India's petroleum and natural gas minister Hardeep Singh Puri met Qatar's minister of state for energy affairs, and president and chief executive of QatarEnergy, Saad Sherida Al-Kaabi, in Doha on Friday.

Qatar reaffirmed commitment to remain a reliable energy supplier, with its minister saying he looked forward to continuing and strengthening energy relations and cooperation with India, a petroleum ministry statement said.

Qatar has traditionally been a key supplier of liquefied natural gas (LNG) to India, bringing in about 40% of India's total imports of the fuel before the start of the US-Iran war.