Oil and Gas Rise After US Seizure of Iranian Ship Imperils Talks
Mike McGlone, Bloomberg Intelligence Senior Commodity Strategist, breaks down moves in the oil and gas sector as the US seizure of an Iranian ship imperils peace talks.
Oil and natural gas prices jumped after renewed risks to energy flows via the Strait of Hormuz threatened to jeopardize much-anticipated peace talks between the US and Iran.
Both oil benchmarks rose more than 5% while European gas was up about 2% after the US Navy seized an Iranian ship on Sunday and both countries claimed that a fragile ceasefire agreement had been violated.
Prices extended gains after US President Donald Trump told Bloomberg that it’s “highly unlikely” he would extend the ceasefire if a deal is not reached before it ends, and said the Strait would remain blocked until an agreement is finalized. He said the expiration of the ceasefire occurs on Wednesday.
Oil prices have been highly volatile amid rapidly shifting perceptions of the negotiations’ status and whether ships can navigate the critical waterway through which nearly a quarter of the world’s energy supplies transit.
The standoff over Hormuz threatens to deepen the global energy crisis and is just one of the unresolved issues, which also include Iran’s nuclear capabilities and Israel’s ongoing invasion of Lebanon.
Commercial traffic through the strait is at a virtual standstill on Monday, with just one oil products tanker seeking to exit the vital waterway and one oil tanker and a liquefied petroleum gas vessel traveling the other way. The Pentagon said in a social media post that US forces have directed 27 vessels to turn back or return to Iranian ports since the start of the US naval blockade.
“Markets are still betting on a timely resolution, but each day raises shortage risk,” said Bjarne Schieldrop, chief commodities analyst at SEB AB in Oslo. “Physical oil flows remain constrained by disrupted flows, longer voyage times and elevated freight and insurance costs.”
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