Middle East instability keeps oil market volatile
Brent's price has slipped today, weighed down by a surge in US crude stocks, after rising sharply following US President Donald Trump’s latest comments on the Strait of Hormuz closure.
IMAGE: Geographical position of the Strait of Hormuz. Getty Images
US crude oil inventories rose by a whopping 10.3 million bbls in the week ending 27 March, according to estimates from the American Petroleum Institute (API). Official inventory data from the US Energy Information Administration (EIA) will be released later today.
Despite the decline in oil futures, ongoing tensions in the Middle East has kept Brent’s price above $100/bbl mark.
In a post on Truth Social yesterday, Trump urged countries facing jet fuel shortages due to disruption around the Strait of Hormuz to either purchase supplies from the US or go to the Strait and “take it” themselves.
The US President criticised countries, including the UK, for not backing Washington in the Middle East conflict.
The European Union (EU) has urged energy ministers to prepare for a prolonged disruption to energy markets due to the war, Reuters reported. EU energy commissioner Dan Jorgensen said EU governments are “encouraged to make timely preparations in anticipation of a potentially prolonged disruption.”
At least 28 vessels, including those carrying crude oil and LNG, en route to India are currently stranded near the Strait of Hormuz, Rajesh Kumar Sinha, special secretary at the Ministry of Ports, Shipping and Waterways, said.
With roughly 20% of global seaborne oil passing through the Strait of Hormuz daily, any disruption to crude flows tend to support Bren’s price.
The conflict, now in its fifth week, has widened across the Gulf region, disrupting energy flows and raising the risk of a broader shock to the global economy, oil market analysts said.
The UAE is now preparing to join the conflict against Iran, in a bid to open the Strait of Hormuz by force, according to a report by the Wall Street Journal. This move will mark the entry of the first Gulf country into the conflict, following three weeks of Iranian strikes on its territory.
Meanwhile, Iran’s military has threatened to target US companies operating in the Middle East starting today, Reuters reported. Tehran has named 18 global companies – like Google, Apple, Intel, Microsoft and more – as their legitimate targets.
“Crude oil prices remained volatile as traders contemplated an escalating conflict in the Middle East against efforts to find a diplomatic solution,” ANZ Bank’s senior commodity strategist Daniel Hynes said.
By Aparupa Mazumder
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