Oil prices fell on Wednesday after crude exports resumed from Iraq's Kirkuk fields to Turkey's Ceyhan port via pipeline, providing modest relief to global markets concerned about supplies from the Middle East.
But with no signs of a de-escalation of the Iran conflict, which has left oil exports from the Middle East largely halted, Brent futures prices have settled above $100 per barrel for the prior four consecutive sessions.
After rising more than three per cent on Tuesday, Brent futures retreated $1.51, or 1.46 per cent, to $101.91 a barrel by 07:31 GMT on Wednesday. US West Texas Intermediate crude dropped $2.75, or 2.86 per cent, to $93.46.
North Oil Company sources said crude exports had resumed via pipeline, after Baghdad and the Kurdistan Regional Government (KRG) agreed on Tuesday to restart flows. Two oil officials said last week that Iraq was seeking to pump at least 100,000 barrels per day of crude through the port.
"The news provided some relief to the market. Any additional volume finding its way back to the market is valuable under the current situation, so prices moved down to reflect that," said LSEG senior analyst Anh Pham.
"But we are still in a $100 per barrel oil environment, and the crisis around the Strait of Hormuz shows no sign of stopping yet."
Oil production from Iraq's main southern oilfields, where most of its crude is produced and exported, has plunged 70 per cent to just 1.3 million bpd, sources said on March 8, as the Iran conflict effectively shut the vital Strait of Hormuz through which some 20 per cent of global oil passes.
Iran confirmed on Tuesday that its security chief Ali Larijani had been killed in an Israeli attack. He is the most senior figure targeted since Supreme Leader Ayatollah Ali Khamenei was killed on the first day of the US-Israeli war at the end of February.
A senior Iranian official said Iran's new supreme leader had rejected de-escalation offers conveyed by intermediary countries.
The US military said on Tuesday it had targeted sites along Iran's coastline near the Strait of Hormuz because Iranian anti-ship missiles posed a risk to international shipping there.
Larijani's death and the US military's strikes on Iranian coastal positions near the Strait of Hormuz raised some hopes that the conflict could end sooner, said Mingyu Gao, chief researcher for energy and chemicals at China Futures.
US crude stocks rose by 6.56 million barrels in the week ended March 13, market sources said, citing API figures on Tuesday.
A Reuters poll showed that US crude oil stockpiles were expected to have risen by about 380,000 barrels in the week to March 13.
(Reporting by Sam Li in Beijing and Siyi Liu in Singapore; Editing by Kate Mayberry and Jacqueline Wong)