Crude oil prices were on course to end the week with gains of over 21% despite a Thursday dip following a signal from the U.S. about intervention in the futures market to calm prices down.
Brent crude was trading at $88.92 per barrel at the time of writing and West Texas Intermediate was changing hands for $85.65 per barrel, after on Thursday the U.S. Treasury Department said it would issue sanction waivers for commodity trading companies to start selling Russian oil sitting on tankers as Middle Eastern oil supply dries up because of the severe disruption in tanker traffic in the Strait of Hormuz. The oil will be sold to India, according to media reports, with Bloomberg writing the amount under consideration totalled about 9.5 million barrels. The period of the sanction waiver is 30 days.
“With every passing day, halted activities in Hormuz will have two major impacts on oil: the inability to store 20 million barrels per day and the lack of flow to the world, which could drive global energy prices higher,” Phillip Nova senior analyst Priyanka Sachdeva told Reuters.
Earlier reports pointed to the possibility that some Middle Eastern oil producers would be forced to start cutting production very soon for lack of sufficient storage capacity, with Iraq already cutting, at a rate of around 1.5 million barrels daily. Kuwait is seen as next, unless traffic through the Strait of Hormuz normalizes within two weeks.
Related: Trump’s Secret Weapon in the Rare Earth War
Commenting on U.S. attempts to calm down oil market with the sanction waivers, ING’s commodity analysts said that “While this might help put some immediate downward pressure on the market, it is not a game-changer. The only way for prices to come down on a sustained basis is a resumption of oil flows through the Strait of Hormuz.” For now, there is little chance of that happening anytime soon.
By Irina Slav for Oilpire.com
More Top Reads From Oilprice.com
- China Halts Fuel Exports Amid Global Market Squeeze
- LNG Shipping Rates Soar 650% to $300,000 Per Day
- Ecopetrol Eyes Oil Output Boost As Iran Crisis Pushes Up Prices
