- WTI rises to nearly $114/barrel, the highest since March 9.
- Trump’s speech did not clarify when Hormuz might reopen.
- WTI is on track for the biggest daily absolute price increase since 2020.
HOUSTON: U.S. oil prices edged more than 11% higher and Brent rose nearly 8% Thursday in volatile trade as traders worried about prolonged oil supply disruptions a day after President Donald Trump said the U.S. would continue attacks on Iran.
Brent crude futures LCOc1 closed $7.87, or 7.78%, higher at $109.03 a barrel. barrel. US West Texas Intermediate crude CLc1 futures rose $11.42, or 11.41%, to $111.54 a barrel, falling to their biggest absolute price gain since 2020.
Both benchmarks remained below peak levels near $120 a share. barrel, which was touched earlier in the conflict.
Trump said military operations would be intensified, but did not specify a timeline for ending hostilities. He gave no details on any steps that could lead to a reopening of the Strait of Hormuz
“We’re going to hit them extremely hard over the next two to three weeks,” Trump said. “We want to bring them back to the Stone Age where they belong.”
Iran is working out a protocol with Oman to monitor traffic in the strait, an Iranian foreign ministry official said, according to a Bloomberg report.
Iran has effectively shut down the narrow waterway through which a fifth of global oil and liquefied natural gas is shipped, in retaliation for US-Israeli strikes that began on February 28. Reopening it has become a priority for governments around the world as energy prices rise.
“The real question on traders’ minds is that if Iran’s oil infrastructure is possibly now at risk, and with more damage in the area now very likely, even if it remains intact, the resumption of oil flows in the region now looks set to be further delayed,” said Dennis Kissler, senior vice president of trading at BOK Financial.
WTI, which typically trades below Brent, priced nearly $3 above Brent as the US contract traded for May delivery while the Brent contract traded for June delivery. WTI’s premium over the global benchmark was the highest in a year.
“The market’s expectation is that if (the Strait of Hormuz) opens up in (a) couple of weeks, that risk premium will immediately drop,” said John Kilduff, partner at Again Capital.
Federal Reserve Bank of Dallas President Lorie Logan said Thursday that a quick war resolution could mean the economic impact could be quite moderate, adding that the economic outlook was uncertain because of the crisis. The United States has some buffers for impacts from the war, Logan said.
Brent oil prices can average $95 per barrel. barrel in the base case and 130 dollars per barrel in the bull case in the second half of the year, Citi said, while oil prices could rise to between $120 and $130 per barrel. barrel in the near term, JP Morgan said. Prices could rise above $150 if the strait remains closed in mid-May, JP Morgan added.
U.S. oil rigs, an indicator of future production, rose by two to 411 this week, energy services firm Baker Hughes said. A rise in the prices of oil to be delivered in the coming months has prompted producers to consider adding more rigs, but they have warned that they would like to see the higher prices last longer.
Front-month WTI traded at its largest ever premium over the second-month and seventh-month contract on Thursday.
Talks on reopening Hormuz
Britain is hosting a virtual meeting with around 40 countries to discuss options for reopening the Strait of Hormuz. The United States shall not participate.
OPEC+, meanwhile, is likely to weigh a further increase in oil production on Sunday, sources said. This will position members to add more barrels if the Strait of Hormuz reopens, but is unlikely to increase supply meaningfully before then.
In Russia, Ukraine’s strikes on port infrastructure, pipelines and refineries have reduced export capacity by 1 million barrels a day, or a fifth of total capacity, sources said, enough to set the stage for impending output cuts.
The head of the International Energy Agency also said that supply disruptions would begin to affect Europe’s economy in April after the region had previously been cordoned off by cargo contracted before the start of the war.
