Oil Rallies Sharply, Supply Risks Grow
Oil prices rose sharply and closed back above US$100 per barrel on Thursday (March 12), as the market assessed the risk of supply disruptions as more persistent after Iran's new supreme leader, Mojtaba Khamenei, pledged to maintain the closure of the Strait of Hormuz. Attacks on commercial vessels in the Persian Gulf also strengthened the risk premium, forcing market participants to reassess the logistics disruption scenario as a key pricing theme.
Brent rose 9.22% to US$100.46 per barrel, its first close above US$100 since August 2022. WTI rose 9.72% to US$95.73. The gains occurred amid a series of shipping incidents, including reports of two oil tankers and a cargo ship being attacked near the coasts of Iraq and the United Arab Emirates. About a fifth of global oil supply passes through Hormuz, so any disruption to tanker flow immediately impacts expectations of physical availability and shipping costs.
Efforts to calm the market through emergency supplies have not yet provided reassurance. The IEA announced the largest emergency oil reserve release in history, at 400 million barrels, including 172 million barrels from the US Strategic Petroleum Reserve. However, the market tended to ignore this move, reflecting doubts that reserve supplies could fill the gap if the primary issue is access to shipping lanes and safety of navigation, rather than simply a shortage.
Comments from US authorities have also shaped operational expectations in Hormuz. Energy Secretary Chris Wright stated that the US Navy is not yet ready to escort tankers through the strait, with military assets still focused on destroying Iran's offensive capabilities. For the market, this heightened uncertainty about when shipping would return to normal, making it easier for a risk premium to persist despite any signs of a reserve release.
Several analysts believe that prices will be unlikely to fall sustainably without a restoration of tanker flows. ING emphasized that a steady decline in prices requires oil to flow through Hormuz again; otherwise, the market's peak could still be ahead. Meanwhile, MST Marquee believes that reserve releases could increase volumes but only partially close the supply gap caused by the strait closure. This view highlights a key transmission channel: while logistical disruptions persist, emergency reserves serve as a temporary cushion, but also mean that inventories will have to be replaced later—potentially maintaining price tensions even after the conflict subsides.
The market will now monitor concrete evidence of normalized shipping in Hormuz, the frequency of attacks on vessels, and details of the implementation and timing of the IEA's stockpile releases. Another key indicator will be whether the US changes its stance on tanker escorts, as such a decision could potentially shift supply expectations faster than additional barrels from the stockpile.
Source: Newsmaker.id
