Economy
Oil Market Surges Over 2% as US-Iran Hostilities Rekindle Supply Fears
By Adedapo Adesanya
The oil market soared by over 2 per cent on Monday after a resumption of military action between the United States and Iran rekindled market concerns about global supply disruption, with Brent crude futures rising by $2.39 or 2.71 per cent to $90.49 a barrel, and the US West Texas Intermediate (WTI) crude futures growing by $2.36 or 2.83 per cent to $85.76 per barrel.
President Trump issued his latest threat to Iran, following the first exchange of fire in a month as the war entered its sixth month.
Speaking at the Oval Office on Monday evening, the American President said he was very clear that the US was ready to “smack” Iran if necessary.
Shipping data shows tanker traffic in the Strait of Hormuz remains at a fraction of pre-war levels, with Reuters citing figures suggesting daily oil flows out of the Persian Gulf averaged 6 million barrels, with Kpler data showing just five commodity vessels traversing the waterway on Monday.
This comes as mediators are seeking a deal to reopen the Strait of Hormuz, through which a fifth of global oil supplies passed before the war began in late February. However, with the latest strikes, progress has stalled.
Market analysts noted that the buffers the global oil market has been relying on are becoming exhausted, with US inventories nearing minimum levels, while China’s ability to keep imports low will be tested as seasonal demand picks up.
Last week, crude stocks in the US Strategic Petroleum Reserve fell by around 3.1 million barrels to 286.6 million barrels.
China had increased its Liquefied Natural Gas (LNG) imports for a second month in a row in June. Chinese imports started recovering in May, rebounding from an eight-year low, as buyers started to purchase more cargoes in the middle of April, and have been keeping a high rate of imports since then.
But the high prices are now leading to some demand destruction. After three months of higher LNG imports compared to a year earlier, China is not set to see its imports of the fuel down by 18 per cent to about 5.2 million tons in August.
President Trump said on Sunday that oil secured under a deal with Venezuela would be used to replenish the US Strategic Petroleum Reserve, which has fallen to near its lowest level in 44 years.
Chevron, India’s ONGC, GE Vernova, Eni and GeoPark are preparing to sign final energy agreements that will bring new foreign investment into the country’s oilfields and power infrastructure.
The new terms will allow companies to export their own crude and receive the proceeds directly, a major departure from the state-controlled model that governed its industry for decades.
