Crude Oil Soars as US Cautions Vessels Near Iran

By Adedapo Adesanya

Crude oil gained more than 1 per cent on Monday after the United States issued an advisory to US-flagged vessels to stay as far as possible from Iranian territory while passing through the Strait of Hormuz and Gulf of Oman.

The price of Brent crude was up 99 cents or 1.5 per cent during the session to $69.04 a barrel, while the US West Texas Intermediate (WTI) crude rose 81 cents or 1.3 per cent to settle at $64.36 per barrel.

The US Department of Transportation (DOT) Maritime Administration yesterday noted that vessels going through the Strait of Hormuz and Gulf of Oman have historically faced the risk of being boarded by Iranian forces, including as recently as February 3.
The agency advised U.S.-flagged ships to stay close to Oman while eastbound in the Strait of Hormuz.

The move renewed concerns that tensions between the US and Iran could lead to oil supply disruptions. About a fifth of the oil consumed globally passes through the Strait of Hormuz between Oman and Iran.

US President Donald Trump has threatened to attack, citing possible executions of protesters, and saying “help is on its way.” He ordered the USS Abraham Lincoln aircraft carrier and a flotilla of accompanying ships to the region.

In June, the US attacked Iranian nuclear facilities at the end of a 12-day Israeli bombing campaign.

Iran’s foreign minister said on Saturday the country will strike US bases in the Middle East if attacked by American forces, which have built up their naval presence in the region.

Investors were also monitoring efforts by Western governments to curb Russia’s income from oil exports that support its war in Ukraine.

The European Commission has proposed a sweeping ban on any services that support Russia’s seaborne crude oil exports, in fresh efforts to reduce revenues that help Russia’s war against Ukraine.

Refiners in India, once the biggest buyer of Russian crude, are avoiding purchases for delivery in April. Market analysts noted that if India fully stopped purchasing this crude, it would boost oil prices.

Meanwhile, Tengiz oilfield in Kazakhstan has returned 60 per cent of its peak production and was pumping at a rate of 550,000 barrels per day as of Sunday, following a forced shutdown for half of January due to a fire.

Tengiz, which is operated by a consortium led by US supermajor Chevron, is expected to reach peak levels of oil output of about 950,000 barrels per day by February 23.