Oil prices dropped today as tensions in the Britain-Iran stand-off eased.
Prices had risen steadily since 15 British sailors and Marines were detained on March 23 by Iran for allegedly entering Iranian waters.
Yesterday, crude fell below 66 dollars (£33) a barrel after Iran’s chief international negotiator called for an end to “the language of force” in the dispute.
Light, sweet crude for May delivery fell 73 cents to 65.21 dollars a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. Two weeks ago, the contract was trading under 60 dollars a barrel.
“The market seemed to believe statements by Iran’s secretary of the Supreme National Security Council, Ali Larijani, could ease tensions between the Islamic Republic and the UK,” said Vienna’s PVM oil Associates.
The fear that Iran could disrupt the oil trade is causing traders to add a risk premium, especially as they see less of a cushion after the Organisation of Petroleum Exporting Countries’ production cuts.
Iran is located along the Strait of Hormuz, through which tankers ship about 17 million barrels of crude oil a day, according to the US Energy Information Administration. That accounts for two-fifths of the world’s crude oil traded by tanker, and about one-fifth of total oil production.