Oil prices extend decline on hopes Iran war may end

• Brent down 7.6%
• WTI down 7.2%
• Hormuz stull closed

Oil prices tumbled further on Tuesday after US President Donald Trump vowed to reopen the Strait of Hormuz and predicted the US-Israeli war on Iran would end “very soon”.

Brent crude had surged to a four-year peak of nearly $120 a barrel a day earlier – to be up 70 percent since the outbreak of the conflict on February 28.

However it began to retreat late on Monday following Trump’s comments and ameliorating remarks from the G7 bloc that its members may release some of their strategic oil reserves.

The selling pressure has extended into Tuesday, with Brent down 7.6 percent at $91.51 as of 14:16 GMT. West Texas Intermediate (WTI), the world’s most traded oil contract, dropped 7.2 percent to $87.95.

“The decline in oil prices seems overdone,” said James Noel-Beswick, head of commodities at Geneva’s Sparta Commodities.

“If the Strait of Hormuz continues to be blocked, there’s no real upper limit to where crude and product prices could go.”

Iran has all but closed the narrow channel as part of its response to US-Israeli attacks. Normally about one fifth of global oil and liquefied natural gas supplies transit through the strait.

Saudi Arabia’s oil fields are in the country’s east, both offshore in the Arabian Gulf and onshore too. State oil company Saudi Aramco usually transports most of its crude exports by tanker through the strait.

Such exports have ceased, Aramco’s CEO Amin Nasser said on Tuesday. Instead, the company is upping use of a pipeline to Yanbu port on Saudi Arabia’s Red Sea coast.

This will reach its maximum capacity of 7 million barrels per day (bpd) “in a couple of days”, Nasser said, of which 5 million bpd will be for export.

Yet the Yemeni Ansar Allah group’s earlier closure of the Red Sea to most shipping demonstrates the vulnerability of maritime trade routes, said Noel-Beswick.

“It’s a very hard problem to solve,” he added. “If the strait was to reopen it would only take one or two attacks to shut it down again because ships wouldn’t be able to get the necessary insurance.”

• Oil eases after Iran conflict sends WTI above $81
• Aramco west coast pipeline to hit maximum capacity ‘in days’
• The Hormuz bottleneck: something’s got to give