Economy
Crude Oil Prices Climb Over $2 as Diplomatic Efforts to End Iran War Stall
By Adedapo Adesanya
Crude oil prices gained more than $2 on Monday amid global supply worries stoked by investor pessimism about diplomatic efforts to resolve the US-Iran war.
Brent crude futures chalked up $2.35 or 2.65 per cent to trade at $90.87 a barrel, while the US West Texas Intermediate (WTI) crude futures grew by $2.10 or 2.55 per cent to $84.50 a barrel.
President Donald Trump said the US was not seeking an extension of the memorandum of understanding with Iran. He also told reporters Iran would not make the type of deal that he thought was necessary.
He further demanded Iran’s surrender and threatened to bomb Oman if the country gets in its way.
Reuters reported that Iran would escalate tensions in the Strait of Hormuz, citing officials and beyond, and launch an attack if the US fails to implement an interim peace deal fully in a matter of weeks.
Iran’s foreign minister has said the waterway will not reopen until America first returns to the deal, while the US Treasury Secretary has warned of unprecedented economic isolation for Iran.
Still, oil prices are unlikely to move substantially higher unless there is a halt in the current flow of crude out of the Strait of Hormuz at night and/or a closure of the Bab el-Mandeb Strait.
Tanker traffic via the Strait of Hormuz slowed further over the weekend, maintaining upward pressure on oil prices. Only five commodity vessels passed the Strait of Hormuz on Saturday, and none were scheduled to transit the waterway on Sunday, data from Kpler showed.
The data, however, does not include tankers that transit Hormuz in so-called dark mode. That compares with 31 tankers passing the Strait of Hormuz the previous weekend.
Before US-Israeli attacks on Iran began in late February, the strait handled about one-fifth of global oil and liquefied natural gas supplies.
Amid the development, Middle East producers like the United Arab Emirates (UAE) and Saudi Arabia stepped up sales to Asian countries.
ADNOC sold at least 14 million barrels of spot crude to Asian refiners at premiums in its latest tender, while Saudi Aramco is offering crude oil outside of the Strait of Hormuz to some Asian refiners.
News about a massive build in US oil inventories helped keep prices below peaks reached earlier in the year. Stocks of crude oil in the US Strategic Petroleum Reserve fell by about 5.3 million barrels to 293.4 million barrels last week, the lowest level since December 1982, according to data from the Department of Energy. The drawdowns are part of a US agreement to release 172 million barrels from the facility.
