Gulf Disruptions Persist, Oil Set for Weekly Gain
Oil prices are strengthening and on track for weekly gains as the Strait of Hormuz remains effectively closed and efforts to end the Iran-Iran conflict have yet to show any progress. On Friday morning Singapore time, the July Brent contract rose 0.7% to US$106.51 per barrel and added about 5% for the week, while the June WTI contract rose 0.6% to US$101.76.
Supply disruptions remain a major driver. The US naval blockade of Iranian ports remains in place, while shipping conditions in the region remain risky. At the entrance to Hormuz, a commercial vessel was reportedly seized by unauthorized personnel and taken to Iranian waters, adding to the risk premium on energy shipments.
Ship flow out of the Persian Gulf also remains severely restricted, holding back oil and fuel supplies to global customers. US government data shows that crude and fuel flows through Hormuz fell by nearly 6 million barrels per day in the first quarter since hostilities began in late February, highlighting the extent of the logistical disruption at the chokepoint.
On the diplomatic front, US President Donald Trump met with Chinese President Xi Jinping on Thursday. The White House said the two leaders discussed the need to keep Hormuz open for energy trade, as well as the potential for increasing US oil flows to China. However, the official Chinese summary did not list energy as a topic, although it did mention Middle East issues. Trump also signaled continued military pressure on Iran in a social media post.
Global supply fundamentals added support. The International Energy Agency (IEA) assessed that the war has squeezed global oil inventories at a rapid pace, and the market could remain "seriously undersupplied" through October even if hostilities end next month. In the physical market, Vitol offered Iraqi oil to buyers, a sign that some cargoes may have made it out of the Gulf, although flows remain constrained.
The oil rally also re-elevated inflation risks, which US data showed this week are beginning to take hold, adding to domestic political pressure on Trump ahead of the November midterm elections. With supplies tight and diplomacy still unmoved, market participants are likely to maintain a cautious bias, while monitoring whether conditions in Hormuz improve or worsen again.
Going forward, the market will await confirmation of increased ship flows, developments in Washington-Tehran negotiations, and signals from Beijing regarding China's role in stabilizing energy flows. The most crucial variables remain: the status of the Iranian port blockade, shipping security around Hormuz, and global inventory data that will indicate how quickly market tightness is eroding supply buffers. (asd)*
Source: Newsmaker.id
