Oil extends surge after soaring over 9% as Trump reinstates Iran blockade, demands Hormuz toll

Brent crude rose another 2.5 per cent to US$85.40 a barrel as at 8.30am Singapore time, after soaring 9.6 per cent on July 13.

PHOTO: REUTERS

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TOKYO – Oil extended gains on July 14 after soaring more than 9 per cent on July 13, as US President Donald Trump reimposed a blockade on Iranian ships transiting the Strait of Hormuz and demanded payment for all other cargo moving through the vital waterway.

Brent crude rose another 2.5 per cent to US$85.40 a barrel as at 8.30am Singapore time, after surging 9.6 per cent on July 13. US West Texas Intermediate climbed 2.6 per cent to US$80.14 after gaining 9.4 per cent the previous session.

Trump demanded a 20 per cent reimbursement on cargoes – or roughly US$30 million (S$38.8 million) on full supertankers carrying oil – as US forces launched a third night of strikes against Iran that may last several more days.

Oil has rebounded to its highest in almost a month, paring a second-quarter drop of about 30 per cent, as the escalating conflict rekindles concerns over supplies from the Persian Gulf.

Iran had managed to export at least 57 million barrels of crude during a brief gap between two American naval blockades, highlighting what is at stake for the global oil market now that restrictions are being reimposed.

“They were just shipping oil out at unbelievable rates,” said Jay Hatfield, chief executive at Infrastructure Capital Management. “We think we’ll hang around this US$80 level, unless there’s some movement one way or another on the strait. But I don’t think we’ll go to, like, US$90 or US$100. And if the strait reopens, we’ll go to US$60 in one hell of a hurry.”

The Joint Maritime Information Center said US Central Command will begin enforcement of a blockade of all Iranian ports and coastal areas at 4pm New York time on July 14.

Trump said the US will be reimbursed by the countries it is helping to protect in the strait, citing Saudi Arabia, the United Arab Emirates, Qatar, Bahrain and Kuwait.

Iran’s army targeted US assets in Kuwait with drones and struck “a hostile vessel” with cruise missiles, the semi-official Fars news agency reported, citing an army statement. Meanwhile, the UAE said two of its tankers were attacked in Omani waters while transiting the southern route of the strait.

Earlier on July 13, Tehran said the agreement with Washington had “undoubtedly entered a crisis phase” and that it will not abide by its terms as long as the other party violates commitments. Iranian Foreign Minister Abbas Araghchi mocked Trump’s toll proposal.

“Iran has always been the Guardian of the Strait and will remain so Forever,” he posted on X. “20% is of course too much. We will be fair.”

Over the past month, Persian Gulf producers had begun marketing additional crude after the interim agreement eased export concerns.

The UAE in particular proved highly successful at moving barrels by utilising shuttle tankers sailing dark, or with their transponders off.

The UAE told OPEC that had it increased crude production to 3.8 million barrels a day in June, up 1.71 million barrels from May, according to a monthly report seen by Bloomberg on July 13, after finding workarounds to the Iran conflict and ramping up output following its departure from the producer group.

Elsewhere, Trump will support a Russian sanctions Bill championed by the late Senator Lindsey Graham, according to a White House official who spoke on condition of anonymity.

That would revive efforts to penalise buyers of Russian oil and natural gas and increase pressure on the Kremlin to end its war with Ukraine.

source: The Straits Times https://www.straitstimes.com/business/companies-markets/oil-soars-more-than-9-after-trump-reinstates-iran-blockade?ref=top-stories