SINGAPORE – Oil prices rose more than 2 per cent on April 28, extending gains from the previous session, as efforts to end the US-Iran war appear stalled, with the crucial Strait of Hormuz waterway still mainly shut, keeping energy supplies from the key Middle East producing region out of the reach of global buyers.
Brent crude climbed 2.4 per cent to US$110.82 a barrel as at 3pm Singapore time, after gaining 2.8 per cent the previous day. The contract is up for a seventh day. US West Texas Intermediate (WTI) crude rose 2.1 per cent to US$98.40 a barrel, after gaining 2.1 per cent in the previous session.
President Donald Trump is unhappy with the latest Iranian proposal aimed at ending the war, a US official said on April 27. Iranian sources disclosed that Tehran’s proposal avoided addressing its nuclear programme until hostilities cease and Gulf shipping disputes are resolved.
Mr Trump’s displeasure with the Iranian offer leaves the conflict deadlocked, with Iran shutting shipping flows through the Strait of Hormuz, which typically carries supply equal to about 20 per cent of global oil and gas consumption, and the US keeping in place its blockade of Iranian ports.
An earlier round of negotiations between the US and Iran collapsed last week following failed face-to-face talks.
“Talks around ‘peace’ still look largely superficial and lack concrete evidence of de-escalation. Despite the rhetoric, vessel movement through the Strait of Hormuz remains curtailed, and that prolonged disruption is what’s keeping oil risk premiums elevated,” said Phillip Nova’s senior market analyst Priyanka Sachdeva.
Ship-tracking data revealed significant disruptions in the region, with six Iranian oil tankers forced to turn back due to the US blockade. However, a liquefied natural gas tanker managed by the United Arab Emirates’ Abu Dhabi National Oil Co did cross the Strait of Hormuz and appears to be near India, ship-tracking data showed on Monday.
Prior to the US-Israeli war on Iran, which began on Feb 28, between 125 and 140 vessels transited the strait daily.
Analysts expect current oil prices to be the new norm, with Suvro Sarkar, DBS Bank’s energy sector team leader, seeing a base case situation moving from a de-escalation of the war to a prolonged ceasefire “limbo situation” with oil prices trading between US$100 and US$125 a barrel.
“With no immediate deal and an indefinite ceasefire providing no certainty on whether the Strait is open or closed, oil prices will trend higher as physical markets catch up with paper markets. Eventually, the conflict will become ‘normalised’ in financial markets, leading to less volatility but a higher baseline,” he said in an email. REUTERS
