HOUSTON: Oil prices jumped 5 percent on Thursday, extending a rally as the escalating US-Israeli war with Iran disrupted supplies and shipping, driving some major producers in the Middle East to reduce output.
Brent crude was up USD4.09, or 5.02 percent, at USD85.49 per barrel by 1:37 p.m. EST, a fifth session of gains. US West Texas Intermediate crude rose USD6, or 8.04 percent, to USD80.66.
US crude futures hit their highest since July 2024 during the session.
“There is no movement in the Strait of Hormuz so prices will grind higher, and with countries having to shut in production then we will be delayed even longer because it is not like you can just resume production at full strength, that will be a problem for a while,” said John Kilduff, partner at Again Capital. Meanwhile, Donald Trump told Axios on Thursday that he needs to be personally involved in selecting Iran’s next leader.
“Khamenei’s son is unacceptable to me. We want someone that will bring harmony and peace to Iran,” Axios quoted Trump as saying in an interview.
“I have to be involved in the appointment, like with Delcy in Venezuela,” Trump said.
Missile attacks hit eastern Tehran, Iran’s ISNA news agency reported, and sirens rang in Dubai as war continued to spill over across the region. Crude oil supplies from Iraq and Kuwait could start shutting within days if the Strait of Hormuz remains closed, potentially cutting 3.3 million barrels per day by day eight of the conflict, JPMorgan analysts said in a note.
Around a fifth of global oil flows through the Strait.
“Crude prices are going to be very sensitive to the Strait’s closure as eventually production in the exporting areas will slow and if this persists into next week, the eventual re-starting of production and re-vamping of shipping once the Strait is re-opened will also take time to get back online,” said Dennis Kissler, senior vice president of trading at BOK Financial.
Iraq, the second-largest crude producer in the Organization of the Petroleum Exporting Countries, has cut output by nearly 1.5 million bpd for lack of storage and an export route, officials told Reuters. Qatar, the biggest liquefied natural gas producer in the Gulf, declared force majeure on gas exports on Wednesday, with sources saying a return to normal production volumes may take at least a month.
Attacks on oil tankers continued on Thursday in the Gulf, as the Bahamas-flagged crude oil tanker Sonangol Namibe reported its hull was breached after a blast near Iraq’s port of Khor al Zubair. Those attacks, along with Chinese measures to reduce fuel exports, pushed prices higher, said UBS analyst Giovanni Staunovo.
The refined product market is also showing signs of stress due to missing Middle East exports, he added.
Some oil refineries in the Middle East, China and India shut their crude units because of the raging conflict in the Middle East.
As a result of a lower supply outlook in fuel markets, US diesel futures jumped 10 percent, reaching just over USD3.60 a gallon during the session.
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