HOUSTON: Brent futures for June delivery settled down more than US$3 on Tuesday following unconfirmed media reports that Iran's president said the country was ready to end the war, assuming some guarantees were put into place.
The Brent May contract was on track for a record monthly gain but it expired on Tuesday, with liquidity dropping as investors move their exposure to the more liquid June contract. Traded volumes for May futures were 18,652 lots, some 30 times lower than June.
The Brent June contract settled down US$3.42 at $103.97 per barrel, dropping after media reports, including from Bloomberg, that Iranian President Masoud Pezeshkian said Iran is ready to end the war but wants guarantees.
Brent crude futures for May settled up US$5.57, or 4.94%, at US$118.35 per barrel, while US crude futures settled down US$1.50 or 1.46% at US$101.38.
Front-month Brent futures hit a record monthly gain of 64% in March, according to LSEG data dating back to June 1988. US benchmark West Texas Intermediate has gained around 52% in the month, its biggest jump since May 2020.
"Once again the trap door under this market opened up with the alleged statement from the Iranian president, if there is an immediate end to hostilities then we know the Strait (of Hormuz) can be reopened and supply will come back on to the market, taking out a lot of the risk premium that has been built up in prices," said John Kilduff, partner at Again Capital.
The international benchmark has steadily risen over the last four weeks as the Iran war has escalated, with attacks across energy infrastructure throughout the Gulf that have resulted in the worst-ever oil-and-gas supply disruption.
Opec's oil output plunged in March by 7.3 million barrels per day on a month-over-month basis to 21.57 million bpd, its lowest level since the height of the Covid-19 pandemic in June 2020, a Reuters survey found, amid forced export cuts.
The market has vacillated throughout the month, with a series of dips each time US President Donald Trump suggests the military operation may be de-escalated – only to resume its upward path due to the supply impairment caused by Iran's threats against vessels transiting the key Strait of Hormuz, the artery used to ship one-fifth of the world's oil and gas.
"With crude now in triple digits, price action is being driven less by new disruptions and more by expectations around intervention and supply response timing," analysts at energy consulting firm Gelber and Associates said in a note.
Trump has suggested other countries should intervene to open the strait, a move European nations have not wanted to take until hostilities cease. The US has removed sanctions on barrels from Russia and pledged reserve releases with a group of other nations, but those measures will only offset the supply loss for a limited period of time.
"With the oil market's remaining buffers gradually being consumed, the market's vulnerability to a prolonged closure of (Hormuz) means that we are moving closer to physical oil shortages across a wider geographic scope, and the upward momentum for oil prices is likely to strengthen further," said Lin Ye, a vice president for commodities markets and oil at Rystad Energy.
Trading on Tuesday was volatile, with front-month Brent futures swinging in a range of up 5.7% to down 1.3% from Monday's close. US Defense Secretary Pete Hegseth warned that if Iran did not make a deal to end the war, the US would continue the conflict with more intensity, telling a briefing on Tuesday that the next few days could be decisive.
The Islamic Revolutionary Guard Corps hit back with a new threat, saying US companies in the region will be targeted as of Wednesday in retaliation for attacks on Iran, listing Microsoft, Google, Apple, Intel , IBM, Tesla and Boeing among 18 firms.
In response, the White House said the US military was prepared to thwart any attacks by Iran. Trump, in a social media post on Truth Social, urged countries that did not help the US in its coordinated strikes against Iran and are now unable to obtain jet fuel to buy American oil and go to the Strait of Hormuz and "just TAKE it."
The president issued the post a day after the Wall Street Journal reported that he told aides he is willing to end the military campaign against Iran even if the strait remains largely closed, leaving its reopening for a later date.
Trump's approval ratings have declined as energy prices have increased, with the average price of a gallon of gasoline nationwide surpassing US$4 on Tuesday for the first time since August 2022, according to AAA data.
Trump also previously warned that the US would "obliterate" Iran's energy plants and oil wells unless Tehran reopened the waterway.
"While diplomatic signals remain mixed, the ground reality suggests that uncertainty will persist," said Sugandha Sachdeva, the founder of SS WealthStreet, a New Delhi-based research firm.
"Even in the event of de-escalation, restoring damaged infrastructure will take time, keeping supply tight." Kuwait Petroleum Corp on Tuesday said its fully loaded crude oil tanker Al Salmi, capable of carrying up to 2 million barrels, was struck by an Iranian attack at a Dubai port.
Officials also warned of the risk of oil spills in the area. — Reuters
