NEW YORK: Oil prices rose towards $100 a barrel on concerns over Saudi Arabia supply disruptions and limited flows through the Strait of Hormuz, but were still on track for their biggest weekly fall since last June as a fragile ceasefire held.
Brent crude futures were up 40 cents, or 0.4%, at $96.32 a barrel at 11:18 a.m. ET or 1520 GMT. West Texas Intermediate futures were up 84 cents, or around 0.9%, at $98.71.
Both contracts have lost about 12% this week after Iran and the U.S. agreed on Tuesday to a two-week ceasefire brokered by Pakistan.
However, fighting has continued and the flow of oil through the Strait of Hormuz remains heavily restricted, keeping futures near $100 a barrel and pushing prices in the physical market to record highs.
“The key issue for the oil market is whether ship traffic through the Strait of Hormuz will resume. So far, there are no signs of this happening. If oil supplies from the Persian Gulf remain blocked, oil prices are likely to rise again,” Commerzbank analysts said in a note on Friday.
Traffic through the Strait of Hormuz remained less than 10% of normal volumes as Tehran asserted its control by warning ships to keep to its territorial waters. The majority of ships that have sailed through the Strait in the past day were linked to Iran, ship-tracking data showed on Friday.
Iran wants to charge fees for ships to pass through the strait under a peace deal, a Tehran official told Reuters on April 7. Western leaders and the United Nations’ shipping agency have pushed back on the idea.
Also read: Pakistan working on ceasefires for Lebanon, Yemen: Reuters report
The crucial artery for oil and gas flows has been effectively shut down by the conflict that began when the U.S. and Israel launched airstrikes against Iran on February 28.
More than 60 energy infrastructure assets across the Gulf have been hit by drone and missile strikes, with around 50 sustaining varying degrees of damage. While most attacks are not expected to cause prolonged disruptions, at least eight facilities face lengthy repair timelines, according to a Thursday note from Natasha Kaneva, head of global commodities research at J.P. Morgan.
Middle East producers shut in about 7.5 million barrels-per-day (bpd) of crude oil production in March as storage capacity tightened, with outages projected to rise to 9.1 million bpd in April, the Energy Information Administration said in a report earlier this week.
“The Strait of Hormuz remains effectively constrained and operation of the global oil system is far from normal,” said Saxo Bank analyst Ole Hansen, adding that futures markets have priced in a partial normalisation but the physical market is reflecting acute scarcity.
Still, producers in the Middle East have asked Asian refiners to submit crude oil loading programmes for April and May in preparation for the eventual resumption of shipping through the Strait of Hormuz, three sources with knowledge of the matter said.
Saudi disruption, Russia waiver
Prices steadied on Friday as investors balanced lower Saudi output with diplomatic progress. Saudi state news agency SPA reported on Thursday that attacks on Saudi energy facilities have cut the kingdom’s oil production capacity by about 600,000 barrels per day and reduced its East-West Pipeline throughput by about 700,000 bpd.
Meanwhile, Lebanon said it intends to take part in a meeting with U.S. and Israeli representatives in Washington next week to discuss and announce a ceasefire.
The U.S. administration is likely to extend a waiver allowing countries to buy sanctioned Russian oil and petroleum products, part of efforts to control global energy prices since the U.S.-Israeli war on Iran, two sources familiar with the matter told Reuters.
Russia’s crude oil exports from its main western ports increased in early April compared with March, according to trading sources and Reuters calculations, despite disruptions to loadings caused by drone attacks on energy infrastructure.
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