Brent Crude futures prices topped $93 per barrel early in the morning in Europe on Thursday, hitting a three-week high amid fading hopes of U.S.-Iran talks as President Trump announced an “unprecedented” economic pressure campaign against Iran.
In early morning trade in Europe, the international benchmark crude, Brent, rose by 1.95% to top $93 per barrel, at $93.48. The U.S. benchmark, WTI Crude, had exceeded the $85 per barrel threshold and was trading 2% higher at $86.12 a barrel.
Early on Thursday, oil prices were extending their rally for the fifth consecutive day, after U.S. President Donald Trump threatened Iran with the “most crushing economic operation ever taken against any country” and warned any country helping Iran with “TREMENDOUS Economic Consequences.”
Concerns about a stricter sanctions enforcement against Iran added to anxiety about the risk to supply in the Middle East.
“Trump also warned of tougher economic penalties for entities supporting Iranian economic activities, signalling a further escalation in US efforts to isolate Iran,” ING’s commodities strategists Warren Patterson and Ewa Manthey wrote in a note early on Thursday.
Despite the recent rise in crude oil futures, the crude market continues to underestimate the real supply disruption in fuel markets, analysts say.
Amid continued supply constraints from the Middle East, “Brent crude is trading around USD 90 per barrel, well below the peaks seen earlier in the conflict and, perhaps more remarkably, nowhere near levels that might normally be associated with a prolonged disruption to the world’s most important oil chokepoint,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, wrote in an analysis on Wednesday.
Crude is available, diesel is not, Hansen added, noting that “the real oil market stress is downstream.”
The diesel crack spread in the United States hit triple digits this week, for the first time ever. The premium over crude prices jumped to as high as $102 per barrel on Monday, before easing slightly to about $100 a barrel later in the week.
By Charles Kennedy for Oilprice.com
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