Iran Tensions Push Oil Near $94

by Bloomberg | C. Gorrivan, G. Smith, W. Kubzansky
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

Oil climbed to the highest in almost a month, as Donald Trump’s threat to crush the Iranian economy further clouded the prospect of ending a war that has upended energy markets.

Brent futures rose about 2% to settle under $94 a barrel. Measures announced by Trump could mean that any country allowing financial institutions, businesses, airports or government entities to aid Iran would face economic consequences.

The move to isolate Iran casts considerable doubt on a near-term deal to reopen the Strait of Hormuz, the chokepoint for about a fifth of the world’s oil.

Trump has shifted from promising a quick war to a longer-term strategy of inflicting economic pain that would eventually force Tehran into talks. Iran has long faced sanctions, however, and it’s not clear what new damage the US could impose.

While Persian Gulf producers have managed to discreetly sneak millions of barrels of crude through the Strait of Hormuz on tankers with their transponders turned off, the prospect of an open-ended conflict has rekindled the price rally and pushed up the cost of fuels like diesel and gasoline.

“In this headline-driven environment, the latest Trump salvo is driving prices higher,” said Tamas Varga, an analyst at brokerage PVM Oil Associates Ltd. “The US President’s threat of economic warfare against Iran is justifiably seen as an escalation of the ongoing conflict.”

The announcement of “economic warfare and isolation” came a day after the United Arab Emirates cut all economic ties with Tehran after accusing Iran of firing missiles at its territory. The UAE acts as a major financial and business hub for Iranians, and its move is set to increase the Islamic Republic’s isolation.

Meanwhile, as US forces are sustaining a blockade of the Iran’s ports, the nation’s oil exports have been virtually stopped, Iranian Central Bank Governor Abdolnaser Hemmati told state TV late Wednesday.

The latest threats from the US further risk irking China, which is the top importer of Iranian oil, although official customs data shows no inflows since 2022. The bulk of the barrels are taken by private refiners, known as teapots, which are attracted to the trade by the discounts typically on offer because of earlier rounds of US sanctions.

Highlighting the disruption to trade flows, China bought millions of barrels of Saudi crude offered via a rare tender and under long-term contracts. While the country’s overall purchases of oil remain well below pre-war levels, a sustained return to the market from China could add fresh momentum to the market.

“We’re still nowhere near pre-conflict levels,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “But the direction of travel in Chinese appetite is encouraging and could become increasingly important if supply constraints persist.”

Still, the shipments also indicate that more crude oil is exiting Hormuz than reported flows show, Babin said.

Other atypical trading patterns could push oil prices higher globally. Prices for Murban crude, the UAE’s flagship grade of oil, have spiked. That means that Asian countries may start importing more West Texas Intermediate, the flagship grade of US oil, as well as North Sea crude, according to Sparta Commodities.

Ukraine, meanwhile, continues to hit major refineries in Russia, as Moscow faces a second wave of gasoline shortages. The attacks have also tightened global diesel supplies.

And further risks to energy supplies continue to mount. On Thursday, UK Maritime Trade Operations said a tanker was hijacked 136 nautical miles east of Mukalla, Yemen, by six armed persons who took control of the vessel and are redirecting it toward Somalia.

Oil Prices

Oil climbed to a one-month high as new US threats against Iran raised fears of a prolonged conflict.

• WTI for September, which expired Thursday, rose 2.3% to settle at $87.83 a barrel.
  • WTI for October rose 2.9% to settle at $86.83 a barrel.
• Brent for October settlement climbed 2.4% to settle at $93.78 a barrel.

by Bloomberg | C. Gorrivan, G. Smith, W. Kubzansky
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas