Crude Oil Surges Despite U.S. Extension Of Two-week Ceasefire
WTI Crude Oil for June month delivery was last seen trading up by $3.54 (or 3.95%) at $93.21 per barrel.
Soon after the war between the U.S. and Iran broke out on February 28, Iran shut the Strait of Hormuz, which catapulted oil and energy prices.
U.S. President Donald Trump announced a ceasefire on U.S. attacks on Iran on April 8 for two weeks until April 22.
In the interim period, U.S. and Iranian delegations met in Pakistan to discuss a framework to charter measures to end the conflict. However, the talks did not proceed as expected, with each side sticking to their respective positions, and eventually Trump called it “a failure”.
Following this, Trump ordered U.S. forces to block ships transiting to and from Iranian ports across the Strait of Hormuz.
The blockade on the Hormuz traffic continued to escalate inflationary pressures with energy experts warning about crude oil “demand destruction” due to stagflation.
Last weekend, Trump assured of a second round of negotiations, which reassured markets of a possible end to conflict through diplomacy.
However, after Trump announced the capture of an Iranian-flagged vessel, Iran refused to participate in the talks.
Trump threatened Iran that he would start bombing Iran’s power and energy infrastructures if it refuses to strike a deal before the ceasefire lapses.
Ignoring Trump’s warnings, Iran responded stating it has “new cards on the battlefield” and will not involve in any negotiations under threat.
Global jitters over further oil price escalation started rising.
With the end of deadline closing in, yesterday Trump announced an extension of truce with no new deadline. However, Trump added that the U.S. blockade will continue and that the forces will stay near Iran, “ready and able” for required responses.
Iran’s semi-official media outlet Tasnim reported that Iran’s position will be “officially announced later”.
Meanwhile, Iran seized two ships in the Strait of Hormuz and escorted them to Iran’s shores.
Britain’s maritime security agency (UKMTO) reported that three container ships have been hit by gunfire near the strait.
With transit concerns still alive, traders discounted the impact of the ceasefire extension and crude oil prices continued to move higher.
The strait remains closed for more than 50 days with nearly 600 million barrels of crude oil blocked, while over 10 million barrels per day remains shut in.
Reportedly, around 20,000 seafarers remain stranded on their respective vessels in the Persian Gulf, with security threats from Iran’s Islamic Revolutionary Guards Corps continuing to increase.
Experts predict that demand and supply concerns would diminish only when traffic resumes in the strait.
On the inventory front, data from the American Petroleum Institute revealed that crude oil inventories fell by 4.40 million barrels for the week ending April 17, well above the 1.00-million-barrel draw expected by markets.
According to the U.S. Energy Information Administration, for the week ending April 17, crude oil inventories in the U.S. rose by 1,925,000 million barrels. At the Cushing, Oklahoma delivery hub, inventories increased by 806,000 barrels.
For the same period, gasoline inventories dropped by 4,570,000 barrels, distillate inventories decreased by 3,427,000 barrels, and heating oil inventories decreased by 328,000 barrels.
While speaking with France Inter Radio, the International Energy Agency’s Executive Director Fatih Birol stated that the current energy crisis is the biggest in history and could exceed the severity of previous global energy shocks. He drew attention to the simultaneous pressure on oil and gas supplies alongside the continuing fallout from Russia’s war in Ukraine.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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