Oil Surges 11%, On-the-Ground Prices Break Through US$141 per Barrel

Jakarta, CNBC Indonesia - The price of global crude oil has exploded again after a brief lull.

According to Refinitiv, the Brent crude oil price closed at US$109.28 per barrel on Thursday (2/4/204) trading, soaring 8.03%. This surge contrasts sharply with Wednesday, when Brent prices plummeted 14.5%.

In yesterday’s intraday futures trading, Brent oil prices briefly touched US$109.74 per barrel. Yesterday’s closing price was the highest since June 2022, or nearly four years ago.

According to S&P Global, in the spot market, Brent oil prices even briefly reached US$141.36 per barrel.

Spot prices reflect demand for Brent oil to be delivered in the next 10 to 30 days. The high prices for near-term deliveries indicate the tightness of current physical supply due to major disruptions triggered by Iran’s closure of the Strait of Hormuz.

That spot price was US$32.33 higher than its futures contract.

Meanwhile, WTI oil closed at US$111.54 per barrel, soaring 11.41% on Thursday. Its price briefly touched US$114 during intraday trading.

Yesterday’s surge broke the negative trend where WTI oil prices had fallen 2.8% over the previous two days.

Amrita Sen, founder of Energy Aspects, said these futures prices give a false sense of security that the situation is not too tense.

“The financial markets are almost covering up the reality of the tight supply actually seen on the ground,” Sen told CNBC International. She added that diesel prices in Europe are currently nearly US$200 per barrel.

Chevron CEO Mike Wirth warned last week that futures prices do not reflect the scale of supply disruptions from the Strait of Hormuz closure. He said the market is moving based on limited information and perceptions.

“There is a real physical impact from the Strait of Hormuz closure that is spreading across the world and the energy system, which I don’t think is fully reflected in the oil futures price curve yet,” Wirth said at the CERAWeek energy conference in Houston.

Oil prices surged on Thursday due to investor concerns that the prolonged war in the Middle East would hinder tanker traffic through the Strait of Hormuz for weeks.

US President Donald Trump’s statement in a national address on Wednesday night warned of potential further military aggression against Iran in the next two to three weeks. This dampened hopes of de-escalation and drove oil prices higher.

However, prices dipped after a report from Iran’s official news agency (IRNA) stated that Iran is cooperating with Oman to draft a “transit monitoring” protocol for the sea route.

Trump blamed the oil price rise on the “Iranian regime launching terrorist attacks on commercial oil tankers and neighbouring countries.”

He stated that the US would strike Iran very hard in the next two to three weeks, but also said the war would not last long and dialogue is still ongoing.

Meanwhile, the IRNA report indicated that tanker traffic could resume if monitored and coordinated by Iran and Oman.

The Strait of Hormuz, which normally handles about one-fifth of the world’s oil and gas flow, has been practically halted since the US-Israel war against Iran began on 28 February, triggering one of the world’s most serious energy crises.

Political risk analyst from Oxford Analytica, Giles Alston, said that countries using the route must now arrange their own oil shipments, as the US appears no longer to be taking a leading role.

Fidelity International portfolio manager George Efstathopoulos said the market had previously anticipated two possibilities: de-escalation or escalation of the war.

Trump had previously said Iran requested a ceasefire, which briefly lowered oil prices. However, he emphasised that the request would only be considered if the Strait of Hormuz is opened.

Iran denied the claim and stated that the route remains under full Iranian military control.

Both sides continue to contradict each other regarding the status of peace negotiations. Trump also gave mixed signals, on one hand saying a peace deal is nearly reached, but on the other ready to send thousands of additional troops.