HOUSTON: Crude oil futures spiked USD5 a barrel on Thursday after reports that air defences were engaging targets over Tehran and of a power struggle between Iran’s hardliners and moderates.
After spiking, the benchmarks pared gains.
Brent crude futures settled at USD105.07 a barrel, gaining USD3.16 or 3.1 percent. West Texas Intermediate futures finished at USD95.85 a barrel, up USD2.89, or 3.11 percent.
Iran negotiator quits
Israeli radio reported the resignation of Iran’s top negotiator, Mohammad Baqer Qalibaf, from the team speaking to the US through Pakistani intermediaries about ending the war.
READ MORE: Oil steadies as US-Iran talks stall, Hormuz shipping still disrupted
Qalibaf’s resignation was seen as a victory for hardline elements within the Iranian government.
Iranian news services said air defences in Tehran were engaging targets over the city. That followed reports of drone attacks on Iranian Kurdish opponents of the Tehran government at a base in Iraq.
Iran flaunted its tightened grip over the Strait of Hormuz with video of its commandos storming a huge cargo ship, after the collapse of peace talks that Washington had hoped would open the important shipping corridor.
US President Donald Trump said in a social media post that he had ordered the US Navy “to shoot and kill any boat” mining the strait.
John Kilduff, partner with Again Capital, said the market was being buffeted by alternating news reports of Trump extending the ceasefire this week and threatening to sink Iranian mine-laying ships.
“Some people call it headline bingo, I call it headline roulette,” Kilduff said. “I fear we’re going to wake up one day and realize we’re in a much worse (supply) position and prices are going to reset to a much higher level.”
Strait of Hormuz transit still restricted
While Trump extended a ceasefire between the countries after a request by Pakistani mediators, Iran and the US are still restricting transit of ships through the strait, which carried about 20 percent of daily global oil supplies until the start of the war on February 28.
Trump, without providing evidence, said on Thursday the US had “total control” over the strait, and that it was “sealed up tight” until Iran made a deal.
Iran seized two ships in the waterway on Wednesday. Trump has maintained a US Navy blockade of Iran’s trade by sea. However, about 10.7 million barrels of Iranian crude exports crossed through the strait and left the area blockaded by the US Navy between April 13 and 21, data analytics company Vortexa said. The US military has intercepted at least three Iranian-flagged tankers in Asian waters and is redirecting them away from positions near India, Malaysia and Sri Lanka, shipping and security sources said on Wednesday.
Trump has not set an end date for the extended ceasefire, White House press secretary Karoline Leavitt told reporters.
Phil Flynn, senior analyst with Price Futures Group, said prices were constrained by confidence in the crude market.
“The market continues to believe we’re going to find a way through this,” Flynn said.
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