United States West Texas Intermediate crude futures yesterday rose by $12.48, or 12.5 per cent to trade at $112.60 per barrel, while Brent crude futures rose by $7.96, or 7.9 per cent, to hit $109.12 per barrel. Still, both benchmarks remained below highs near $120 a barrel touched earlier in the conflict, according to Reuters.
The spikes were after US President Donald Trump announced a continuation of attacks on Iran, leading to fears of prolonged disruptions to oil supply. He, however, did not give details on any steps that could lead to a reopening of the Strait of Hormuz.
Trump said: “We’re going to next two to three weeks. We’re going to bring them back to the Stone Ages where they belong.” Reuters noted that markets reacted to the absence of any “clear mention of ceasefire or diplomatic engagement” in the speech, senior market analyst at Phillip Nova, Priyanka Sachdeva, said.
He said: “If tensions intensify or maritime risks increase, oil could test fresh highs as markets price in potential supply disruptions.” Reuters noted that Britain is hosting a virtual meeting of around N40 countries to discuss options for reopening Strait of Hormuz but that the United States is not due to attend.
According to the news agency, some market participants said they had stopped dealing with cargoes priced off the Dubai Middle East benchmark, normally used to value nearly a fifth of global crude supply, because ports inside the Strait of Hormuz cannot be used. A 12-member Organization of the Petroleum Exporting Countries (OPEC) and 10 other major non-OPEC oil-producing nations, including Russia, (OPEC+), according to Reuters, is likely to weigh a further oil output increase on Sunday, sources said, a move that would position members to add more barrels should the Strait of Hormuz reopen but is not likely to meaningfully increase supply before then.
It added that in Russia, Ukraine’s strikes on port infrastructure, pipelines and refineries had reduced export capability by 1 million barrels per day, or a fifth of total capacity, sources say, enough to set the stage for imminent production cuts.
