VIENNA, Austria, (AP) -Oil prices dipped below $64 a barrel Thursday, reflecting some calming of markets as Iran’s detention of 15 British navy personnel approached the one-week mark.
Still, prices remained poised to move upward. Iran, the world’s fourth-largest oil producer, is located along the Strait of Hormuz, through which about two-fifths of the world’s oil is transported. Traders worry that oil supplies could be disrupted if unrest escalates there.
Light, sweet crude for May delivery fell 36 cents to $63.72 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract settled at $64.08 a barrel Wednesday, its highest close since September.
May Brent crude on London’s ICE Futures exchange fell 6 cents to $65.72 a barrel.
Oil spiked briefly above $68 a barrel in after-hours trading late Tuesday on a rumors — denied by the U.S. military — that Iran had fired on a U.S. ship in the Persian Gulf.
“The hypersensitivity to the geopolitical situation is setting the market up for vastly increased volatility ahead,” said Fimat USA analyst John Kilduff.
Iranian authorities have detained the British marines and sailors since last Friday on claims they had trespassed into Iranian territory. Britain maintains they were in Iraqi waters.
On Wednesday, Iran’s foreign minister said Britain must admit the 15 entered Iranian waters to resolve a standoff over their capture.
Also providing support to prices was the weekly petroleum supplies report from the United States. The Energy Department reported Wednesday that crude oil inventories slipped by 900,000 barrels last week to 328.4 million barrels. Stocks of gasoline and distillate fuel, which include heating oil and diesel fuel, also fell.
It was gasoline’s seventh straight week of decline, a worrisome signal ahead of the summer driving season.
But traders remained focused on developments in Iran.
“The spike showed people what could happen if tensions do increase,” said Eric Wittenauer, an energy analyst at A.G. Edwards in St. Louis.
Vienna’s PVM Oil Associates noted remarks by OPEC Secretary General Abdullah al-Badri linking current prices to geopolitical developments and not market fundamentals, suggesting a bullish market.
Such remarks indicate that “it is unlikely the exporter group will move to increase supplies in the near future,” said PVM.
In other key contracts, heating oil was down 1.14 cents to$1.8160 per gallon and natural gas prices fell 6.4 cents to $7.608 per 1,000 cubic feet.