Crude Slides as War Exit Signals Emerge

by Bloomberg
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

Oil declined after Iran and the US signaled openness toward a resolution in the conflict that’s upended global energy shipments, sanding away a long-standing risk premium in prices.

West Texas Intermediate futures fell 1.5% to settle near $101 a barrel, after earlier climbing as much as 3.9%. Iranian state media reported on Tuesday that President Masoud Pezeshkian said the country is ready to end the war while reiterating Tehran’s demands. Those have previously entailed ending the conflict across all fronts and recognition of its sovereignty over the vital Strait of Hormuz.

Still, traders were wary that an imminent resolution wouldn’t undo existing disruptions to the global energy complex. The war, now in its fifth week, has caused extensive infrastructure damage and effectively closed the strait, choking off supplies of crude, natural gas and products such as diesel to global markets, which has led to skyrocketing energy prices and concerns about inflation.

Global benchmark Brent posted its strongest monthly gain ever amid ongoing attacks in the Persian Gulf. US gasoline, meanwhile, topped $4 a gallon for the first time since August 2022, posing a major political risk for US President Donald Trump’s White House in a midterm-election year.

Oil declined as Iran and the US signaled potential de-escalation despite ongoing supply disruptions.

“At this point, even if the conflict resolves tomorrow, it will take weeks to months to restore flows,” said Shaia Hosseinzadeh, chief investment officer at OnyxPoint Global Management. “Price signals are not adequately reflecting the physical reality.”

The report from Iran added to signals from the US that a resolution may be within reach soon. Trump told the New York Post on Tuesday the US is “not going to be there too much longer,” calling the campaign against Iran “an obliteration.”

“I think we are closer to an offramp exit scenario than a lot of people actually assume,” Christoph Eibl, chief executive officer and co-founder of commodities trader Tiberius Group, said in a Bloomberg television interview.

Prices initially soared on Tuesday as Iran struck a Kuwaiti oil tanker in a drone attack during a fresh wave of attacks around the Persian Gulf, but the gains subsequently cooled. The Al-Salmi, a fully-laden very large crude carrier, was hit in the anchorage area of Dubai’s port with the hull sustaining damage. Tehran has regularly targeted ships across the Gulf since the war began, previously attacking two vessels near Iraq.

Trump has regularly swung between saying an end to the war is near and warning that he’s prepared to ramp up military operations. On Monday, he said that the US will blow up power plants, oil facilities and “possibly” desalination infrastructure if Iran doesn’t re-open Hormuz.

The US leader told allies struggling to obtain jet fuel that normally flows through the strait to just “take it,” arguing in a social media post that the US had already weakened Iran enough.

Hostilities continued on Tuesday with Israel Defense Forces completing another wave of strikes on Iranian regime targets in Tehran, while Saudi Arabia intercepted and destroyed drones. Iran’s semi-official Mehr news agency reported a US-Israeli strike on Bahman Port in the east of Qeshm Island.

“With just under 15 million barrels a day of Gulf supply offline, rising refinery shutdowns and growing infrastructure risks, we expect Brent to average roughly $125 a barrel in April with credible spikes towards $150,” Societe Generale SA said in a report. “Prices could go considerably higher if Bab El-Mandeb at the southern end of the Red Sea is effectively shut.”

Oil Prices

• WTI for May delivery edged down 1.5% to settle at $101.38 a barrel in New York.
• Brent for May settlement, which expires on Tuesday, was up 4.9% to settle at $118.35 a barrel.
  • The more-active June contract fell to settle at $103.97 a barrel.

by Bloomberg
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas