Measures aimed at easing supply are failing to calm markets, and oil is heading for weekly gains
Disruption of trade in the Strait of Hormuz has become the primary issue. Despite the US attempt to grant countries 30-day licenses to purchase Russian oil and petroleum products stranded at sea, oil prices are heading for weekly gains as of Friday.
Brent is more sensitive than WTI to energy security issues. May Brent crude rose 10 cents, or 0.1%, to $100.56 a barrel as of 04:00 GMT, heading for a weekly increase of approximately 9%. April WTI, however, fell 16 cents, or 0.2%, to $95.57 a barrel, but is poised for a weekly increase of 7%.
Despite a temporary pause in the embargo on Russian oil, the broader supply restrictions have not been resolved.
ICE Brent futures have already surpassed $100 a barrel, and Russia's oil exemption and the release of unprecedented emergency reserves are seen as significant steps toward calming markets.
The market views this as a short-term solution that doesn't address the core of the supply disruption. These efforts have eased market concerns, but won't solve the fundamental problem. The most important issue is the restoration of navigation in the Strait of Hormuz. Monthly crude oil spreads for the coming months point to an unresolved and ongoing tightening of supply.
Meanwhile, Brent is finding support from WTI as Europe becomes more sensitive to energy security issues, while the US can mitigate its risk thanks to domestic production.
The announcement regarding Russian oil came a day after the US Energy Department announced it would release 172 million barrels of oil from its Strategic Petroleum Reserve to curb rising oil prices.
This plan was coordinated with the International Energy Agency (IEA), which agreed to release a record 400 million barrels of oil from strategic reserves, including a U.S. contribution.
However, the temporary relief created was shattered by a renewed escalation of risks in the Middle East. On Thursday, both benchmark prices surged more than 9%, reaching their highest levels since August 2022.
Iran's new religious leader, Mojtaba Khamenei, said Iran would continue the fight by keeping the Strait of Hormuz closed as a bargaining chip against the U.S. and Israel.
Iraqi security officials reported on Thursday that two fuel tankers in Iraqi waters were struck by Iranian explosive-laden boats. An Iraqi official told state media that the country's oil ports had completely ceased operations.
Meanwhile, the U.S. said the U.S. Navy, perhaps with an international coalition, would escort ships passing through the Strait of Hormuz whenever militarily possible. However, how they will carry out this statement under Iranian assault inside the firing range remains unclear.
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