Oil Weakens, Ceasefire Hopes Hit Trump's Hormuz Ultimatum
Oil prices reversed after briefly strengthening, as the market weighed the possibility of a de-escalation in the conflict through ceasefire talks against the risk of a new escalation related to the Strait of Hormuz. Brent traded near $109 per barrel, down from its previous high of nearly $112.
Meanwhile, disruptions to physical flows remained a concern as the Strait of Hormuz, a passageway for about a fifth of global oil shipments, reportedly remained largely blocked and only a small number of vessels passed through. In recent sessions, the market also highlighted the surge in tightness in the futures structure, with the spread between the two nearest Brent and WTI contracts briefly widening to more than $10 per barrel, a condition that often indicates short-term supply shortages.
Sentiment was briefly helped by an Axios report that the US, Iran, and regional mediators were discussing the terms of a potential 45-day ceasefire. However, the Iranian Foreign Ministry stated that Tehran wanted a definitive end to the war, not just a ceasefire. Meanwhile, US President Donald Trump issued an ultimatum over the weekend to Iran to reopen Hormuz, threatening attacks on power plants and other infrastructure if the demands were not met. Iran rejected the demands.
Market participants are beginning to separate the impact of the “geopolitical risk premium” from actual supply conditions. Some believe the focus is shifting to the “physical premium” as the near-total closure of Hormuz restricts flows, although Iran has stated that Iraq will be exempt from the restrictions and SOMO has stated that Iraqi oil shipments can pass, a test of buyers’ confidence in security guarantees.
Supply pressures are also reflected in producer pricing policies. Saudi Arabia raised its official selling price for its main oil to Asia to a record high; Saudi Aramco is said to be raising its Arab Light for May sales to a $19.50 premium over the regional benchmark. Meanwhile, OPEC+ warned that damage to energy assets could have a lasting impact on supply even after the conflict subsides, although the group also agreed to increase production quotas as a signal of intent amid limited flows from the Persian Gulf. (gn)
Source: Newsmaker.id
