Oil set for weekly gains after US threatens indefinite blockade of Iran
- Brent futures were down 12 cents, or 0.1%, to $86.95 a barrel
Oil prices rose due to US threats of an indefinite naval blockade on Iran, sparking concerns over Middle East crude supply disruptions, even as demand forecasts show weakness.
- US threats of an indefinite naval blockade on Iran.
- Disruptions to shipping traffic in the Strait of Hormuz.
- Rising oil prices despite forecasts for weaker demand.
- Increased US crude inventories and global storage levels.
Oil prices were mixed on Friday but set for weekly gains after the U.S. threatened an indefinite naval blockade of Iran, raising concerns about disruptions to crude supplies from the Middle East.
Brent futures were down 12 cents, or 0.1%, to $86.95 a barrel at 9:11 a.m. EDT (1311 GMT), while U.S. West Texas Intermediate crude futures were up 13 cents, or 0.2%, to $81.38 a barrel.
Brent and WTI were on track for weekly gains of about 3.4% and 4%, respectively.
Higher oil prices are a natural result of the latest approach by the U.S., which implies little hope of a near-term resolution in the Middle East, said Bjarne Schieldrop, chief analyst for commodities at SEB Research.
On Thursday, the U.S. said it could maintain a naval blockade of Iran indefinitely and increase economic pressure on Tehran in response to ceasefire talks that have stalled.
“Watch this space for more announcements coming next week because we are going to apply measures like have never been seen in the history of economic isolation of a country,” Treasury Secretary Scott Bessent said in an interview on Newsmax’s “Rob Schmitt Tonight” program.
“A return to normal flows out of the Strait of Hormuz is now suddenly without any near-term hopes,” Schieldrop said.
Traffic slows through the Strait
As both the U.S. and Iran made claims over control of the Strait of Hormuz, shipping traffic through the channel fell below the month’s average.
Before the U.S.-Israeli attacks on Iran began in late February, the strait handled about one-fifth of global daily oil and liquefied natural gas supplies.
Two vessels from the state-owned Abu Dhabi National Oil Company were attacked transiting the strait on Thursday, the United Arab Emirates’ state news agency WAM said, an incident the UAE government condemned as an Iranian attack.
While Middle Eastern supplies are constrained, forecasts from OPEC pointed to weaker demand growth and U.S. crude inventories posted their largest weekly increase in more than 3-1/2 years.
“This week’s reports by the IEA and EIA were quite revealing. Storage is holding up much better than feared, which should pull oil prices lower,” said Norbert Rucker, head of economics and next generation research at Julius Baer, referring to the International Energy Agency and U.S. Energy Information Administration.
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