By: Economy Middle East

Oil prices declined on Friday but remained on course for a monthly gain of around 20 percent, as crude shipments continued to move through key maritime routes despite the absence of any significant progress in negotiations between the United States and Iran.

As of 6:12 GMT, Brent crude futures dropped $1.73, or 1.94 percent, to $87.3 a barrel, while U.S. West Texas Intermediate (WTI) crude fell $1.96, or 2.34 percent, to $81.63 a barrel. Even so, both benchmarks were on track to post monthly gains of roughly 20 percent.

Oil shipments continue to flow through the Strait of Hormuz

Oil prices edged lower as concerns over escalating tensions in the Middle East were offset by signs that oil shipments continued to flow through the Strait of Hormuz. The vital waterway, which handles around one-fifth of global crude oil and liquefied natural gas trade, has remained a key focus for energy markets after being largely disrupted since the launch of the U.S.-Israel war on Iran on February 28.

Meanwhile, Saudi Arabia is seeking to spearhead a multinational maritime security coalition aimed at strengthening defense cooperation in the Bab el-Mandeb Strait, the Red Sea and the Gulf of Aden, critical chokepoints for global energy supplies.

According to the Saudi defense ministry, 14 countries, including Djibouti, Egypt, Pakistan, Sudan and Turkey, have expressed support for the initiative.

The move comes after Iran-backed Houthi militants in Yemen announced a naval blockade on Saudi Arabia last week, threatening the Red Sea shipping route, a key alternative to the Strait of Hormuz for Saudi oil exports.

While tanker traffic has continued through both waterways, heightened security risks have driven up shipping and insurance costs, leaving a sizeable geopolitical risk premium embedded in oil prices.

U.S. crude inventories dip to lowest since 2018

Meanwhile, U.S. crude inventories recorded a far steeper-than-expected decline, reinforcing expectations of tighter near-term supply. Data from the U.S. Energy Information Administration (EIA) showed commercial crude stockpiles fell by 7.2 million barrels to 404.5 million barrels in the week ended July 24.

The drawdown left U.S. crude inventories at their lowest level since 2018, underscoring an increasingly tight market and amplifying concerns that an escalating conflict in the Middle East could further disrupt global oil supplies.