US Oil Prices Hold Above US$110 per Barrel
US crude oil prices are reported to have held steady above the US$110 per barrel level. This surge in prices has been triggered by rising geopolitical tensions in the Middle East, following Iran’s firm rejection of the deadline from US President Donald Trump regarding the reopening of the Strait of Hormuz.
The Strait of Hormuz is the world’s most vital energy trade route. Tehran’s refusal of Washington’s demands has sparked serious concerns in the global market about the potential for long-term disruptions to crude oil supplies.
Market participants have reacted swiftly to this uncertainty. Here are some key points influencing the current oil price movements:
The US benchmark crude, West Texas Intermediate (WTI), for May delivery fell 0.5 per cent, trading at $110.99 per barrel. On Thursday, the contract surged, closing at US$111.54. This is the highest in more than three years, according to Dow Jones Market Data.
Brent crude for June fell 0.6 per cent to $108.41 per barrel, after closing up 3.5 per cent last week. This marks the seventh consecutive weekly gain.
The eight members of the Organization of the Petroleum Exporting Countries (OPEC) and its allies agreed on Sunday (5/4) to raise oil production quotas by 206,000 barrels per day for May, a second consecutive monthly increase.
OPEC+ expressed concern over attacks on energy infrastructure. They noted that restoring damaged energy assets to full capacity is extremely costly and time-consuming, thereby affecting overall supply availability.
According to Stephen Innes, managing partner at SPI Asset Management, with the tight deadline for Iran to reopen the strait, crude oil trading will cease to be based on supply and demand balances. However, the distribution of probability outcomes is narrowing within an increasingly tight window.
Innes stated that the market is attempting to estimate the probability of a ceasefire that does not yet exist. If the US continues to attack power plants and Iran’s energy infrastructure, this is no longer about whether tensions in the Middle East will ease. “It’s about how quickly the supply chain can return to normal, even if that happens,” he said.
If oil prices continue to hold above US$110 per barrel, global inflation pressures are predicted to rise. Oil-importing countries will face higher energy cost burdens, which could ultimately affect consumer goods prices and transportation costs worldwide.
To date, the international community continues to monitor developments in diplomacy between Washington and Tehran. Markets hope for a peaceful solution to avoid a deeper energy crisis. However, the still-hardened positions of both sides keep oil prices in a bullish trend.