Oil prices are extending their gains early on Wednesday, with Brent jumping to over $114 and WTI exceeding $103 per barrel, as oil market participants weigh the stalled U.S.-Iran negotiations and the possibility of an extended U.S. blockade outside the Strait of Hormuz.
As of early morning in Europe, the front-month Brent Crude futures rallied 2.95% to trade at $114.50 after hitting the highest level in more than a month, as media reports and signals from the U.S. Administration point to a prolonged U.S. naval blockade in the Gulf of Oman outside the Strait of Hormuz, aimed at choking Iranian oil exports and revenues.
The U.S. benchmark, WTI Crude, topped the $103 per barrel mark again, rising by 3.48% to $103.40 a barrel.
U.S. crude and product inventories continued to fall in the week ending April 24, according to estimates by the American Petroleum Institute (API) published late on Tuesday.
Oil prices continued their multi-day rally early on Wednesday after reports emerged that the U.S. would not be letting up its blockade and would pursue choking off Iran’s oil exports.
U.S. President Donald Trump has instructed aides to prepare for an extended blockade of Iran, U.S. officials told the Wall Street Journal earlier this week.
The oil futures market is now beginning to catch up with the huge physical supply disruption that the closed Strait of Hormuz is causing.
“Bets for when the SoH will reopen keeps sliding into the future,” Bjarne Schieldrop, Chief Analyst, Commodities at SEB Bank, wrote in a note earlier this week.
“Alarm bells will ring loudly if the SoH doesn’t reopen during May,” the analyst said, adding that “if a decent reopening doesn’t take place before June/July, then the risk is significant for a real crisis where the world may be forced to reduce its oil consumption closer to the level of availability.”
By Tsvetana Paraskova for Oilprice.com
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