DTN Oil Update
Oil Jumps on Renewed Hormuz Closure, Maritime Hostilities
VIENNA (DTN) -- Crude and product futures leapt about 5% on Monday morning after Tehran on the weekend reimposed traffic restrictions over the Strait of Hormuz following the U.S. seizure of an Iranian ship as the U.S. embargo on Iranian ports continued. Iranian gunboats also reportedly opened fire on an Indian-flagged vessel and other ships in the strait.
By 7:55 a.m. EDT, NYMEX WTI crude for May delivery was up $4.50, or 5.5%, to $88.35 bbl, after reaching an intra-day high of $91.2 bbl. ICE Brent for June rose $4.27, or 4.7%, to $94.65 bbl, following a session peak at $97.50 bbl.
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Downstream, NYMEX ULSD futures for May delivery advanced $0.1646 to $3.5620 gallon, while front-month NYMEX RBOB futures climbed $0.0828 to $3.0876 gallon.
The U.S. Dollar Index gained 0.112 points against a basket of foreign currencies to 98.01 points.
Crude futures reversed most of Friday's slump of up to 12%, which came after Tehran announced that it will allow traffic to flow unimpeded on the Strait of Hormuz in reaction to a U.S.-brokered ceasefire between Israel and Lebanon.
Idle tankers in the Persian Gulf immediately set sail to attempt passage, but only a few traversed the waterway amid confusion over the status of the strait. Tehran said the reopening was conditioned on the U.S. lifting its embargo on Iranian vessels and ports. It declared the strait shut again after a U.S. warship fired upon and seized an Iranian-flagged cargo ship off an Iranian port.
Iranian military gunboats engaged at least three commercial ships, including an Indian-flagged ship, that it said were attempting to transit to transit the Hormuz without approval.
The brief reopening of the strait had led to expectations of a resumption of oil flows on the Hormuz, which typically provides passage to some 20 million bpd of petroleum liquids that have been stranded for seven weeks now, creating the largest oil supply disruption in history. The Iranian concession was also interpreted as a sign that a permanent negotiated agreement or at least an extension of the ceasefire, set to expire Tuesday, between the warring parties was moving closer, lowering the geopolitical risk premium.
Both sides called the others' actions over the weekend a breach of the ceasefire. The Iranian military declared the Strait of Hormuz closed until the U.S. lifted its blockade, and government officials said the ongoing U.S. embargo was a major roadblock to ongoing diplomatic efforts. U.S. President Donald Trump said Iran had committed a serious violation of the ceasefire but remained optimistic about a peace deal. Tehran, however, said that there is no plan for a second round of negotiations for now.