Oil markets brace for longer-lasting Persian Gulf upheaval and higher crude prices

[Data analyzing in commodities energy market: the charts and quotes on display. US WTI crude oil price analysis. Stunning price drop for the last 20 years.]
SlavkoSereda/iStock via Getty Images

Brent crude settled above $100/bbl Thursday for the first time in three and half years, as concerns grow about a protracted period of disruption to the world's oil markets.

Many traders initially expected days of disorder when the U.S. and Israel first attacked Iran on February 28, but now they are expecting the turmoil to last weeks or even months [https://www.wsj.com/business/energy-oil/oil-markets-new-reality-the-gulf-disruption-isnt-going-to-end-soon-e635837d].

One reason for the rising pessimism is the surge in attacks on tankers near the Strait of Hormuz, as at least seven vessels were hit in waters off the coast of Iraq and Dubai during the past 24 hours, with one of the ships, a foreign tanker carrying Iraqi fuel oil, on fire in Iraqi waters.

U.S. officials said Iran has started to litter the strait with sea mines, and Energy Secretary Wright said the U.S. Navy is not yet ready to start escorting tankers through the vital waterway through which 20% of the world's oil typically flows.

Iran's new Supreme Leader, Mojtaba Khamenei, promised to keep the Strait closed and attack U.S. bases in the Middle East.

The war is causing the biggest oil supply disruption in the history of global markets, the International Energy Agency said, with crude and product shipments through the Strait of Hormuz down more than 90% from ~20M bbl/day before the war.

A day earlier, IEA's 32 member countries approved the release of a record volume of 400M barrels of oil from strategic stockpiles.

"The market is getting more and more nervous," Neil Crosby of Sparta Commodities said in a note. "We see not only supply chain issues from the Hormuz closure but also growing medium-term implications from all the attacks on infrastructure in the region."

"Near $100/bbl Brent is still undercooked," Crosby wrote, adding the planned release of strategic oil reserves "sounded big, but spaced over several months, it won't come anywhere near to solving things."

"Investors are increasingly pricing in a more protracted conflict that causes extensive economic damage," Deutsche Bank's global head of macro research and thematic strategy Jim Reid said in a note.

"After all, with no concrete signs of de-escalation yet, that's keeping oil prices elevated and raising the risk of a broader stagflationary shock," Reid wrote.

Front-month Nymex crude (CL1:COM [https://seekingalpha.com/symbol/CL1:COM]) for April delivery finished +9.7% to $95.73/bbl, front-month Brent crude (CO1:COM [https://seekingalpha.com/symbol/CO1:COM]) for May delivery ended +9.2% to $100.46/bbl, the highest settlement value for both benchmarks since August 29, 2022.

Also posting fresh 52-week highs were front-month Nymex diesel (HO1:COM [https://seekingalpha.com/symbol/HO1:COM]) for April delivery, +6% to $3.8989/gal, and front-month Nymex RBOB gasoline (XB1:COM [https://seekingalpha.com/symbol/XB1:COM]) for April delivery, +6.3% to $2.9646/gal.

U.S. natural gas futures (NG1:COM [https://seekingalpha.com/symbol/NG1:COM]) settled slightly higher, as the U.S. Energy Information Administration reported a 38 Bcf withdrawal from storage for last week, which was at the low end of market expectations and left inventories just 17 Bcf under the five-year average; front-month Nymex gas for April delivery ended -0.7% to $3.233/MMBtu.

ETFs: (USO [https://seekingalpha.com/symbol/USO]), (BNO [https://seekingalpha.com/symbol/BNO]), (UCO [https://seekingalpha.com/symbol/UCO]), (SCO [https://seekingalpha.com/symbol/SCO]), (USL [https://seekingalpha.com/symbol/USL]), (DBO [https://seekingalpha.com/symbol/DBO]), (DRIP [https://seekingalpha.com/symbol/DRIP]), (GUSH [https://seekingalpha.com/symbol/GUSH]), (USOI [https://seekingalpha.com/symbol/USOI]), (UGA [https://seekingalpha.com/symbol/UGA]), (UNG [https://seekingalpha.com/symbol/UNG]), (BOIL [https://seekingalpha.com/symbol/BOIL]), (KOLD [https://seekingalpha.com/symbol/KOLD]), (UNL [https://seekingalpha.com/symbol/UNL]), (FCG [https://seekingalpha.com/symbol/FCG]), (XLE [https://seekingalpha.com/symbol/XLE])

MORE ON CRUDE OIL

* Shipping Stocks Catch A Windfall As Freight Markets Go Vertical [https://seekingalpha.com/article/4881900-shipping-stocks-catch-a-windfall-as-freight-markets-go-vertical]
* Oil Is The New Silver; Time To Short? [https://seekingalpha.com/article/4881864-oil-is-the-new-silver-time-to-short]
* 12-Week War To Shave 3% Off Global GDP In A Demand Destruction Event [https://seekingalpha.com/article/4881715-12-week-war-to-shave-3-percent-off-global-gdp-in-a-demand-destruction-event]