Oil jumps 7% to above US$100 ahead of US blockade on Iran
A view shows oil pump jacks outside Almetyevsk in the Republic of Tatarstan, Russia on June 4, 2023.
PHOTO: Reuters file
SINGAPORE — Oil prices jumped above US$100 (S$128) a barrel on Monday (April 13) as the US Navy prepared to block ships from reaching Iran via the Strait of Hormuz, a move that could restrict Iranian oil exports, after Washington and Tehran failed to reach a deal to end the war.
Brent crude futures rose US$6.71, or 7.05 per cent, to US$101.91 a barrel by 1.04am GMT (9.04am SGT) after settling 0.75 per cent lower on Friday.
US West Texas Intermediate was at US$104.16 a barrel, up US$7.59, or 7.86 per cent, following a 1.33 per cent loss in the previous session.
"The market is now largely back to conditions before the ceasefire, except now the US will block the remaining up to two million barrels per day Iranian-linked flows through the Strait of Hormuz as well," said Saul Kavonic, head of energy research at MST Marquee.
President Donald Trump said on Sunday the US Navy would start blockading the Strait of Hormuz, raising the stakes after marathon talks with Iran failed to reach a deal to end the war, jeopardising a fragile two-week ceasefire.
He added that the price of oil and gasoline may remain high through November's midterm elections, a rare acknowledgement of the potential political fallout from his decision to attack Iran six weeks ago.
US Central Command said US forces would begin implementing the blockade of all maritime traffic entering and exiting Iranian ports at 10am ET (10pm SGT) on Monday.
It would be "enforced impartially against vessels of all nations entering or departing Iranian ports and coastal areas, including all Iranian ports on the Arabian Gulf and Gulf of Oman", a CENTCOM statement on X said.
US forces would not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports, it added.
IG market analyst Tony Sycamore said the move would effectively choke off the flow of Iranian oil, forcing Tehran's allies and customers to apply the necessary pressure to get the waterway reopened.
Iran's Revolutionary Guards said on Sunday that any military vessels attempting to approach the Strait of Hormuz would be considered a violation of the two-week US ceasefire and be dealt with harshly and decisively.
Despite the stalemate, three supertankers fully laden with oil passed through the Strait of Hormuz on Saturday, shipping data showed. They appeared to be the first vessels to exit the Gulf since the ceasefire deal was struck last week.
Oil tankers are steering clear of the Strait of Hormuz ahead of the US blockade on Iran, shipping data on LSEG showed.
On Sunday, Saudi Arabia said it has restored full oil pumping capacity through the East-West pipeline to about seven million barrels per day, days after providing an assessment of damage to its energy sector from attacks during the Iran conflict.
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