U.S. President Donald Trump said on Monday that the ceasefire with Iran was “on life support,” citing disagreements over several key issues, including a halt to hostilities across all fronts, the lifting of a U.S. naval blockade, the restart of Iranian oil exports and compensation for war-related damages.
Crude oil price on May 12
Brent crude futures climbed 30 cents, or 0.29%, to $104.51 a barrel, while U.S. West Texas Intermediate rose 31 cents, or 0.32%, to $98.38 by 0002 GMT. Both benchmarks had already gained nearly 2.8% on Monday.In an effort to calm markets, the Trump administration said on Monday it would release 53.3 million barrels of crude from the U.S. Strategic Petroleum Reserve through loans to refiners and suppliers.
Market attention now shifts squarely to President Trump’s visit to China this week. Experts say there is hope he can persuade Beijing to leverage its influence over Iran to push for a comprehensive ceasefire and a resolution to the ongoing disruption in the Strait of Hormuz.
Separately, the Wall Street Journal reported on Monday that the UAE carried out military strikes inside Iran, including an attack earlier in April on a refinery located on Lavan Island. The UAE has not publicly confirmed the operation, according to the report.
Since the U.S. and Israeli-led war against Iran began on Feb. 28, both Brent and WTI crude prices have surged more than 40%. Citi said in a note that oil prices were likely to remain volatile and could rise further if negotiations between Washington and Tehran continue to face obstacles.
Where are prices headed?
According to Morgan Stanley analysts, the global oil market is now in “a race against time,” as the factors that have so far prevented a sharper spike in crude prices may weaken if the Strait of Hormuz remains shut into June.
Despite disruptions impacting nearly 1 billion barrels of oil supply, crude prices still remain below the highs reached in 2022 after Russia invaded Ukraine. Analysts led by Martijn Rats said the market entered the current crisis with stronger buffers, while investors have largely continued to expect that Hormuz would eventually reopen.
Morgan Stanley also pointed to rising U.S. crude exports and softer Chinese imports as two major reasons why the market has so far avoided a deeper supply shock. However, the brokerage cautioned that a prolonged closure of Hormuz could tighten global supplies again if the disruption lasts longer than either China or the United States can comfortably manage.
Haitong Futures said the market remains nervous, warning that the ceasefire may only be temporary. The firm added that stalled negotiations between the U.S. and Iran could trigger another escalation in tensions and push oil prices higher.
Nuvama Institutional Equities said an extended shutdown of the Strait of Hormuz could disrupt nearly 20 million barrels per day of crude flows globally. In such a scenario, the brokerage said oil prices could potentially climb to between $110 and $150 a barrel.
Saudi Aramco CEO Amin Nasser warned on Monday that disruptions to shipments through Hormuz could delay the return of stability in oil markets until 2027, potentially affecting around 100 million barrels of oil supply per week.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)