Written by Mohi Narayan
NEW DELHI (Reuters) – Oil prices changed course in Asian trading on Tuesday, replicating previous gains, after a report that US President Donald Trump told his aides that he was ready to end the Iran war without reopening the Strait of Hormuz.
Brent crude futures for May delivery fell $1.22, or 1.08 percent, to $111.56 a barrel by 0210 GMT, after rising two percent earlier in the session. The May contract expires on Tuesday, with the most active June contract at $105.76.
US West Texas Intermediate crude futures for May fell 98 cents, or 0.95%, to $101.90 a barrel after hitting their highest point since March 9 in early trading.
Analysts said that the drop in prices is a temporary reaction to the idea of an end to the war, but any tangible change in prices will not be achieved until flows through the Strait of Hormuz are fully restored.
Trump has told aides that he is prepared to end the military campaign against Iran even if the Strait of Hormuz remains largely closed and leaves its reopening for a later date, the Wall Street Journal reported Monday, citing administration officials.
Trump warned on Monday that the United States would “destroy” Iranian power plants and oil wells if Tehran did not reopen the waterway.
Iran’s virtual closure of the Strait of Hormuz, which normally transports about a fifth of the world’s oil supplies and large numbers of liquefied natural gas tankers, has pushed Brent crude futures up 59% so far in March, their highest monthly gain ever, while West Texas Intermediate crude has risen 58% this month, the biggest rise since May 2020.
“While diplomatic signals remain mixed, the reality on the ground suggests that uncertainty will persist,” said Sugandha Sachdeva, founder of SS Wealth Street, a New Delhi-based research firm.
“Even if the escalation de-escalates, it will take time to restore damaged infrastructure, which will keep supplies limited.”
Highlighting the threat to seaborne energy supplies from the war between Iran, the United States and Israel, Kuwait Petroleum Corporation said on Tuesday that a fully loaded crude oil tanker, Al Salmi, capable of carrying up to two million barrels, was subjected to an alleged Iranian attack in the port of Dubai. Officials also warned of the possibility of oil spills in the area.
On Saturday, Yemen’s Iran-aligned Houthi forces targeted Israel with missiles, raising new concerns about possible unrest in the Bab al-Mandeb Strait, the passageway that connects the Red Sea to the Gulf of Aden and is a major route for ships moving between Asia and Europe via the Suez Canal.
Kpler data showed that Saudi crude exports were rerouted through this corridor, as quantities redirected from the Gulf to the port of Yanbu on the Red Sea reached 4.658 million barrels per day last week, which represents a sharp rise from an average of 770 thousand barrels per day in January and February.
Meanwhile, a preliminary poll conducted by Reuters on Monday showed that crude oil inventories in the United States are expected to decline last week, along with distillate and gasoline inventories.
“Contradictory statements and signals about the state of war are flying thick and fast, and truth and facts are the biggest casualty,” said Vandana Hari, founder of oil market analysis firm Vanda Insights.
“Crude oil will likely continue to be volatile and directionless.”
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