Oil rose for a fifth day as traders assessed the widening fallout from the US and Israeli war against Iran, with the combatants vowing to press on with the conflict that’s upending energy markets.
West Texas Intermediate climbed toward $76 a barrel, after spiking about 11 per cent in the first three days of the week, while Brent closed near $83. US president Donald Trump expressed confidence in the military campaign, even as the timeline for operations remained unclear. The Islamic Revolutionary Guard Corps, meanwhile, pledged to intensify and expand strikes in the coming days.
The market’s principal concern remains the Strait of Hormuz, with traffic through the waterway including oil and gas tankers all but halted. The effective closure of the conduit has bottled up crude supplies from Iran, as well as other Persian Gulf states, forcing some to start shutting-in output.
Global energy markets have been rocked by the war, which is entering its sixth day with no immediate prospect of a resolution in sight. The conflict has spread right across the Middle East, hoisting oil, gas, and product prices, lifting freight rates, and spawning an ever-widening wave of disruption for producers, as well as importing nations that rely on flows from the region.
“Storage capacity-driven supply shut-ins in the Middle East have begun,” JPMorgan Chase & Co. analysts including Natasha Kaneva said in a note. “The key question now is how quickly production can return once export routes normalise. We estimate most fields can restart within days, with full capacity typically restored within two to three weeks.”
In a bid to break the impasse at Hormuz — which connects the Persian Gulf to the Indian Ocean — Washington has proposed a plan to provide insurance guarantees to vessels and possibly naval escorts. Marsh, the world’s largest insurance broker, said the move could take weeks to arrange.
In a sign of the fallout, India’s Mangalore Refinery and Petrochemicals has told customers that it will suspend oil-product exports as it may not be able to receive crude deliveries. The state-owned refiner operates a 300,000-barrel-a-day plant in the southern Indian state of Karnataka.
China — the world’s largest oil importer — has said it will dispatch its special envoy on Middle East affairs to the region to conduct mediation efforts. While the exact mission of the representative wasn’t detailed, the move reflects Beijing’s concern about access to crude supplies.
WTI’s prompt spread — the difference between its two nearest contracts — has widened to $1.49 a barrel in backwardation, a bullish pattern that indicates near-term tightness. A month ago, the gap was 28 cents.
In the US, meanwhile, nationwide crude stockpiles expanded by about 3.5 million barrels last week to reach the highest since last May, according to the Energy Information Administration. - Bloomberg
