Oil prices edged lower during Thursday's Asian trade as investors locked in profits and assessed the implications of a new wave of United States strikes on Iranian military targets, which have heightened fears of an extended conflict and further supply disruptions in the Strait of Hormuz.
By 3:20 pm AEST (5:20 am GMT), Brent crude futures were down 41 cents, or 0.5%, at US$84.54 a barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 22 cents, or 0.3%, to US$79.38 a barrel.
Despite the pullback, both benchmarks remained near one-month highs after posting gains for three consecutive sessions.
The latest decline came after the United States struck Iran's coastal defence systems and missile sites on Wednesday following the reimposition of a naval blockade on Iranian ports.
Tehran responded by threatening to further restrict regional energy exports, declaring it was engaged in an "existential war" with America.
ING commodity strategists said in The Commodities Feed:
"Tanker traffic through the Strait of Hormuz remains depressed, with crossings still under clear pressure. Even so, U.S. officials claim more than 100 vessels managed to get through the strait over the last week with U.S. military support.
The concern is that renewed oil supply disruptions come amid the large inventory drawdowns through the second quarter, leaving the market more vulnerable. In addition, global SPR releases, which have helped the market out over recent months, are set to end in the next few weeks."
Shipping activity through the strategic waterway remained subdued. Seven vessels transited the Strait of Hormuz on Wednesday, down from 13 the previous day, the first full day after the U.S. reinstated its naval blockade of Iran.
Fighting between Iran and the United States reignited last week, shattering the fragile ceasefire reached in June after months of conflict.
Reuters also reported on Wednesday that U.S. officials believe the latest strikes could pave the way for "more complex" military operations against Iran, adding to uncertainty across energy markets.
Meanwhile, U.S. government data showed crude stockpiles declined last week as refiners increased processing rates and fuel demand remained resilient during the peak summer driving season.
The U.S. Energy Information Administration (EIA) said crude inventories fell by 1.7 million barrels to 409.7 million barrels in the week ended 10 July. Analysts had expected a larger drawdown of 2.6 million barrels.
