Oil prices continued to rise in early Friday trading despite a fragile ceasefire between the US and Iran. The main drivers were significant losses in crude production in Saudi Arabia and the ongoing de facto closure of the Strait of Hormuz to tankers. West Texas Intermediate (WTI) futures rose nearly 2% to $99.72 a barrel, while Brent climbed to $97.68. Markets continue to price in a substantial risk premium due to disruptions in the key shipping corridor.
The conflict, which began with US and Israeli air strikes on Iran in late February, has led to the effective blockade of the strategic strait. This has fundamentally changed global supply risks. According to Saudi authorities, attacks on the kingdom’s energy facilities have cut its output by about 600,000 barrels per day. JPMorgan analysts estimate that about 50 infrastructure sites in the Persian Gulf region were damaged over six weeks of conflict, disrupting refining capacity by 2.4 million barrels per day.
Energy-market analysts warn of the possibility of further sharp price increases. John Bedesey, head of consulting firm Stratas Advisors, said Brent could reach $190 a barrel if tanker traffic through the strait remains at current low levels. Even a partial resumption of vessel movements would ease pressure on prices, but they would still remain significantly above pre-conflict levels, reflecting acute concerns about supply shortages.
Peace talks scheduled in Pakistan face a major obstacle. Iran is reportedly insisting on imposing a fee for ships passing through the Strait of Hormuz as part of any peace agreement. This demand has been categorically rejected by Western leaders and the International Maritime Organization. Tehran’s stance complicates the prospects for a smooth return to normal shipping and increases the legal and economic uncertainty surrounding the crucial route.
Against this backdrop, there have been notable changes in oil trade flows. For the first time in years, China’s independent refiners have begun buying Iranian light crude at a premium to Brent. India is also expected to increase purchases after temporary waivers from sanctions were granted by Washington. This shift, along with improved refining margins in China, could lead to a reconfiguration of regional oil supplies in the coming weeks, weakening the traditional discounts on Iranian crude.
Comments on the news
What precisely is the fee Iran proposes for passage through the Strait of Hormuz and on what legal basis? - Iran proposes charging a fee for ships transiting the Strait of Hormuz, citing its right to control territorial waters and ensure the safety of navigation. The legal basis cited includes national laws on territorial waters and international maritime conventions that allow coastal states to regulate passage through their territorial waters.
Why was Iranian oil traditionally sold at a discount, and how has that changed in recent years? - Iranian oil was traditionally sold at a discount due to international sanctions that limited buyers and complicated logistics, as well as product quality factors (heavier and more sulfurous crude). In recent years, especially after some sanctions were eased under the JCPOA and amid rising demand in Asia, discounts have narrowed and Iran has been able to sell oil closer to market prices.
What exactly were the "temporary sanctions waivers" Washington granted India for purchases of Iranian oil? - Washington granted India temporary waivers from sanctions allowing limited purchases of Iranian oil without risking US penalties. These waivers typically permitted the purchase of specified volumes for India’s strategic needs and included provisions for gradually reducing imports to zero to give India time to find alternative suppliers.
Full version: النفط يرتفع بعد هجمات إيرانية ومخاوف مضيق هرمز