NEW YORK: Oil prices closed up nearly 3% on Tuesday as persistent worries about supply constraints from the closed Strait of Hormuz outweighed concerns about the United Arab Emirates’ decision to leave Opec and the wider Opec+ group.
Brent futures for June ended up US$3.03 or 2.8% at US$111.26 a barrel, marking its seventh consecutive day of gains. US West Texas Intermediate (WTI) futures for June settled up US$3.56 or 3.7% at US$99.93 a barrel, after briefly trading above US$100 earlier in the session for the first time since April 13.
Prices trimmed some of the advances after the United Arab Emirates, the fourth-largest producer in Opec+, said on Tuesday it would exit the group on May 1, dealing a blow to the oil-exporting groups and their de facto leader, Saudi Arabia.
“In normal times, this would have been very bearish news for the oil market and sparked a sizable selloff,” said John Kilduff, partner at Again Capital.
He estimated the UAE could quickly add between 1 million and 1.5 million barrels per day of output. “But with the Strait of Hormuz effectively closed, there’s nowhere for that supply to go … so we’re likely to see oil prices continue their slow march higher,” he added.
US President Donald Trump was unhappy with the latest Iranian proposal to end the war, a US official said on Monday, as Iranian sources disclosed that the proposal would avoid addressing the nuclear programme until hostilities cease and Gulf shipping disputes are resolved.
Trump’s displeasure with the offer leaves the conflict deadlocked, with Iran shutting shipping flows through the strait, a conduit for about 20% of global oil and liquefied natural gas supplies, and the US retaining its blockade of Iranian ports.
“With peace talks stalled and no clear path to reopening the Strait of Hormuz, traders are factoring in a prolonged disruption to a critical artery of global supply,” said Rystad Energy analyst Jorge Leon. An earlier round of negotiations between the United States and Iran collapsed last week after face-to-face talks failed.
Ship-tracking data showed significant disruptions in the region, with six Iranian oil tankers forced to turn back due to the US blockade, but some traffic is still moving. The Idemitsu Maru, a Panama-flagged tanker carrying 2 million barrels of Saudi oil, and an LNG tanker managed by the United Arab Emirates’ Abu Dhabi National Oil Co (ADNOC) crossed the Strait on Tuesday, shipping data showed. The ADNOC tanker was the first loaded LNG tanker to cross since the Iran war started on February 28.
Prior to the US-Israeli war on Iran, which began on February 28, between 125 and 140 vessels transited the strait daily.
The amount of crude oil held around the world on tankers that have been stationary for at least seven days rose to 153.11 million barrels as of April 24, Vortexa data shows. That figure is the highest since January, and up 25% from 122.60 million on April 17.
The World Bank said on Tuesday that global energy prices could rise 24% in 2026 to their highest level since Russia’s invasion of Ukraine, even if the most severe Middle East supply disruptions ease by May. Its baseline assumes shipping through the Strait of Hormuz gradually recovers by October, but it said the risks were “markedly tilted” toward higher prices.
In the United States, gasoline prices climbed to their highest in nearly four years, AAA data showed. Later in the day, market sources citing American Petroleum Institute figures said the US had drawn down 8.67 million barrels of gasoline in the week ended April 24, while crude oil inventories also declined. The drawdown was sharply higher than the nine analysts polled by Reuters estimated.
The US Energy Information Administration will release its own storage reports on Wednesday.
A Ukrainian drone attack sparked a major blaze at Russia’s Tuapse refinery, which has annual production capacity of 240,000 barrels per day, turning out naphtha, diesel, fuel oil and vacuum gasoil.
Meanwhile, China may resume fuel exports in May after state oil firms applied for permits to ship gasoline, diesel and jet fuel, the Financial Times reported, citing traders. — Reuters
