Oil prices sink in Asian trade
Oil prices sank in Asian trade today after Saudi Arabia and the United Arab Emirates opened crude pipelines bypassing the Strait of Hormuz, which Iran has repeatedly threatened to close, analysts said.
New York's main contract, light sweet crude for August delivery, shed 34 cents to $86.76 a barrel and Brent North Sea crude for delivery in August retreated five cents to $102.35.
No Related Stories Found
Alternative crude transport routes created by the UAE and Saudi pipelines alleviated supply concerns which had been held hostage by Iran in negotiations with the West over its nuclear programme, IG Markets said in a report.
"Very quietly and strategically Saudi Arabia and UAE have opened up pipelines that allow it to bypass the Strait of Hormuz which up until now has been the trump card for Iran in its bargaining with the West," it stated.
"This fresh transport oil link should help weaken the threat of supply disruption coming out of Iran and force it back to the negotiating table."
The UAE yesterday inaugurated its newest pipeline, which demonstrated its ability to bypass the Strait of Hormuz by pumping 500,000 barrels of oil from the emirate to Fujairah oil terminal on the Gulf of Oman.
The pipeline will be fully operational in August, and will have an initial capacity of 1.5 million barrels per day rising to a maximum 1.8 million bpd, officials said.
Meanwhile, Saudi Arabia converted a natural gas pipeline running from the country's eastern province to a terminal near the Red Sea to enable it to pump crude.
Reports estimated that the new links will more than double the total pipeline capacity bypassing the Strait of Hormuz to 6.5 million barrels per day, almost 40% of the 17 million barrels that transits Hormuz.