Oil Extends Rally as Stresses Mount Across Global Energy Markets

8jbh5yc])0a068ewys1x97wy_media_dl_1.png Vessel tracking data compiled by

Article content

(Bloomberg) — Oil extended gains as the US and Israeli war against Iran disrupted crude flows to key importers, with the combatants vowing to press on with the conflict and top importer China seeking to conserve fuel.

Article content

Brent climbed toward $85 a barrel, after jumping 12% over the first three days of the week, while West Texas Intermediate was near $78. US President Donald Trump expressed confidence in the military campaign, even as the timeline for operations remained unclear. The Islamic Revolutionary Guard Corps, meanwhile, pledged to intensify and expand strikes in the coming days.

Article content

Article content

Article content

In a sign of the cascading difficulties, the Chinese government told its largest refiners to suspend exports of diesel and gasoline, with curbs that reflect efforts to prioritize domestic needs as the crisis deepens. Earlier this week, a major Indian processor told customers it would suspend product exports. Japanese refiners are also asking their government to release oil from strategic petroleum reserves.  

Article content

Article content

Article content

The market’s principal concern remains the Strait of Hormuz, with traffic through the waterway including oil and gas tankers all but halted. The effective closure of the conduit has bottled up crude supplies from Iran, as well as other Persian Gulf producers, forcing some to start shutting-in output.

Article content

Global energy markets have been rocked by the war, which is entering its sixth day with no immediate prospect of a resolution in sight. The conflict has spread right across the Middle East, hoisting oil, gas, and product prices, lifting freight rates, and spawning an ever-widening wave of disruption for producers, as well as importing nations that rely on flows from the region.

Article content

Article content

“If we see even one more successful strike on an oil tanker or infrastructure, or sustained disruption, prices can spike sharply again,” said Priyanka Sachdeva, a senior market analyst at brokerage Phillip Nova Pte.

Article content

Brent’s prompt spread — the difference between its two nearest contracts — has widened to $3.89 a barrel in backwardation, signaling near-term tightness. A month ago, the gap was 57 cents. Further out, futures are far lower for upcoming months, with the October contract almost $11 a barrel below May’s.

Article content

In a bid to break the impasse at Hormuz — which connects the Persian Gulf to the Indian Ocean — Washington has proposed a plan to provide insurance guarantees to vessels and possibly naval escorts. Marsh, the world’s largest insurance broker, said the move could take weeks to arrange.

Article content

Ship-tracking data compiled by Bloomberg show traffic through the strait has plummeted by well over 95%, with major crude carriers and gas tankers avoiding the route. The few ships still moving are leaving the gulf with location transponders turned off, a common practice in conflict zones.