LONDON: Oil prices rose more than 3 per cent on Tuesday (Apr 28) as stalled efforts to end the Iran war kept the Strait of Hormuz largely closed, constraining Middle East supplies, though the UAE’s announcement that it would leave OPEC and OPEC+ trimmed gains.
Brent crude futures for June climbed US$3.37, or 3.1 per cent, to US$111.60 a barrel by 1.36pm GMT, after gaining 2.8 per cent to close the previous session at their highest since Apr 7. The contract is up for a seventh straight day.
US West Texas Intermediate (WTI) crude for June rose US$3.72, or 3.7 per cent, to US$100.09 a barrel, after gaining 2.1 per cent in the previous session. WTI futures rose above the US$100 per barrel threshold for the first time since Apr 13 on Tuesday.
Prices pared some gains after the United Arab Emirates said on Tuesday it had quit OPEC and OPEC+, dealing a heavy blow to the oil exporting groups and their de facto leader, Saudi Arabia.
US President Donald Trump, meanwhile, was unhappy with the latest Iranian proposal to end the war, a US official said on Monday, as Iranian sources disclosed that it avoided addressing the nuclear programme until hostilities cease and Gulf shipping disputes are resolved.
Trump’s displeasure with the offer leaves the conflict deadlocked, with Iran shutting shipping flows through the Strait, a conduit for about 20 per cent of global oil and gas supplies, and the US retaining its blockade of Iranian ports.
“Oil above US$110 per barrel reflects a market that is rapidly repricing geopolitical risk,” said Rystad Energy analyst Jorge Leon.
“With peace talks stalled and no clear path to reopening the Strait of Hormuz, traders are factoring in a prolonged disruption to a critical artery of global supply,” he added.
“Even in a best-case scenario, any US–Iran agreement is likely to be narrow and partial, leaving the Strait issue unresolved, which means the upside risks to prices remain.”
An earlier round of negotiations between the United States and Iran collapsed last week after face-to-face talks failed.
Ship-tracking data showed significant disruptions in the region, with six Iranian oil tankers forced to turn back due to the US blockade, but some traffic is still moving.
A Panama-flagged tanker, Idemitsu Maru, carrying crude oil from Saudi Arabia, was attempting to cross on Tuesday, shipping data showed, and a liquefied natural gas tanker managed by the United Arab Emirates’ Abu Dhabi National Oil Co crossed the Strait on Monday.
Prior to the US-Israeli war on Iran, which began on Feb 28, between 125 and 140 vessels transited the strait daily.
The loss of about 10 million barrels per day of crude and products through the Strait will continue to exceed falling consumption as inflationary pressures and demand destruction loom, PVM analyst Tamas Varga said, leading to an ever-tighter oil market balance.