NEW YORK: Oil prices rose more than 2% on Thursday after a cargo vessel was hit by an unknown projectile near Oman, putting an evacuation effort for ships from the key Strait of Hormuz on hold, and reawakening concerns about the worldwide flow of oil.
The flow of oil and gas has been disrupted since the joint US-Israeli attacks on Iran at the end of February, but the agreement between the US and Iran to end the war has allowed the resumption of traffic through the crucial Strait, which Iran had effectively blockaded.
The United Nations International Maritime Organization on Thursday paused its effort to shepherd ships and seafarers through the Strait after the cargo ship reported a suspected attack, reigniting fears that the preliminary agreement to end the Iran war would not hold.
After the market closed on Thursday, two US officials told Reuters that Iran fired on the cargo ship as it attempted to pass through the Strait. Iranian authorities said the security of vessels passing outside designated Hormuz routes is not guaranteed.
Brent futures rose US$1.52, or 2.1%, to settle at US$75.26 a barrel, while US West Texas Intermediate crude rose US$1.58, or 2.3%, to settle at US$71.92. On Wednesday, both crude benchmarks closed at their lowest since February 27, the day before the war began as crude shipments through the Strait rose to their highest since the start of the war.
Before the war, about 20% of world oil supplies passed through the Strait, located between Iran and Oman.
"Storage tanks across the Gulf are around 50% to 60% full, so if tanker traffic through the strait does not pick up in the near term, producers will need to throttle back output, and the full recovery moves into next year," analysts at consultancy Rystad Energy said in a report.
US Secretary of State Marco Rubio told Gulf allies on Thursday that any deal with Iran would take their interests into account, as he wrapped up a Middle East trip aimed at winning over regional partners with deep reservations about the preliminary accord.
The US and the six-member Gulf Cooperation Council (GCC) said a lasting peace would mean addressing Iran's ballistic missiles, drones and support for proxy groups. They also backed "free, unconditional, and unrestricted navigation" in the Strait of Hormuz without "any tolls, fees, or attempts to assert control."
If Iran threatens or blocks ships in the strait, "then we're going to have a problem," Rubio said, having earlier told ministers that "no country on Earth has the right to charge for the use of international waterways" and that fees for shipping would never be part of any deal.
An article in the Wall Street Journal, however, said Iran estimates charging for security, safety and environmental services in the strait would bring in US$40 billion a year for states involved.
US gasoline futures jumped about 5%, while US diesel gained about 4%.
Analysts also said technical buying and short-covering contributed to the rally, which had become "increasingly oversold," consulting firm Gelber & Associates said in a note.
Despite Thursday's rally, both crude benchmarks have remained in technically oversold territory for more than a week.
In Venezuela, thousands were feared dead after two powerful earthquakes wreaked havoc in and around the capital Caracas. The quakes could slow the increase in Venezuelan oil exports expected by US President Donald Trump's administration after the US captured Venezuela's President Nicolas Maduro in January. — Reuters
