Oil prices edge down as investors weigh possible US sanctions on 'shadow fleet'

Oil prices dipped slightly on Friday as investors evaluated potential risks in the Middle East and the likelihood of the US softening restrictions on its "shadow fleet" of tankers. Brent crude futures slipped 41 US cents, or 0.39 percent, to $105.51 a barrel by 0012 GMT, while US West Texas Intermediate (WTI) crude futures fell 54 US cents, or 0.55 percent, to $97.43.

WTI had actually risen over three percent on Thursday following a major reduction in US crude stocks, which kept prices up. The International Energy Agency (IEA) agreed to release more than 20 million barrels of diesel into the market, alongside any leftover oil from a record emergency reserve release pledged in March to increase supply and reduce soaring prices.

However, oil prices had surged the previous day, indicating investors were unhappy with these measures, according to Haitong Futures. The IEA's actions suggest that calming Middle Eastern tensions would be the real way to ease oil market concerns. The US administration is contemplating lifting sanctions on certain "shadow fleet" vessels, which have transported oil and petroleum products from Russia, Iran, and Venezuela, aiming to curb record-high global freight rates, a US official revealed on Wednesday.

These discussions follow President Donald Trump's temporary lifting of sanctions on Russian diesel fuel, which drew criticism from Ukrainian President Volodymyr Zelenskiy, European nations, and some of Trump's Republican colleagues in the US Senate. Meanwhile, the situation in Yemen has worsened, with Saudi Arabia and Yemen's Houthi rebels clashing, and renewed attacks on ships in the region, contributing to the price increase.

Iran has intensified its strikes against the waterway in response to the US blockade of its ports and tougher sanctions implemented last month. On Thursday, the Houthis targeted the presidential palace complex in Aden, Yemen's second-largest city, killing two guards. Additionally, the Saudi-led coalition in Yemen reported dozens of attacks on Saudi infrastructure amid the escalating conflict.