Oil pushed higher as US president Donald Trump cast doubt over the ceasefire with Iran after rejecting Tehran’s latest peace offer, prolonging the effective closure of the vital Strait of Hormuz.
Brent crude traded near $105 a barrel after rising 2.9 per cent in the previous session, while West Texas Intermediate was close to $99. Trump told reporters in the Oval Office that the truce was on “massive life support” while deriding the Iranian response to his proposal to end the 10-week war.
A ceasefire has been in place since early April and has held even after a series of flare-ups in violence recently, including attacks on ships. The near-closure of the Strait of Hormuz has significantly disrupted flows of crude, natural gas and fuels to global customers, raising concerns about an inflation crisis.
Iran responded to Trump’s peace proposal by demanding the US lift a naval blockade and provide sanctions relief, while maintaining a degree of control over traffic through the Strait of Hormuz, said a person familiar with the matter, who asked not to be identified discussing sensitive information.
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“A comprehensive peace deal is unlikely to materialise,” Bloomberg Economics analysts including Dina Esfandiary and Becca Wasser wrote in a note. “We think the US and Iran will likely return to strikes. But we expect an intense exchange of fire to be temporary and reduce to lower-levels of fighting — what we call the new normal in this protracted conflict.”
The US president is meeting with his national security team to discuss the war, including a possible resumption of military action, Axios reported, citing three US officials. Trump also told Fox News that he’s looking at reviving a plan to escort ships through the strait.
Pump prices in the US have jumped, heaping political pressure on Trump and the Republican Party ahead of midterm elections in November. The nation has unleashed another wave of emergency oil to try and tame rising prices.
The war is likely to feature when Trump meets President Xi Jinping this week, with US officials saying the US president will press the Asian nation’s approach to Iran. The US Treasury Department on Monday sanctioned more entities for helping to sell Iranian oil to China, the biggest buyer of its crude.
Saudi Aramco chief executive Amin Nasser said global markets are losing 100 million barrels of supply every week Hormuz is shut. The company has redirected some of its exports through its western port, but prices remain high, and buyers — including China — are taking less volumes.
While there’s little sign of an immediate resolution to the war, gauges of market strength have weakened in recent sessions as refiners dial back their buying. Brent’s prompt spread was near $4 a barrel in backwardation on Tuesday, compared with a high of almost $10 early last month. - Bloomberg
