Brent and WTI Set for 20% Monthly Surge Despite Strait of Hormuz Traffic News
Crude oil benchmarks have retreated over the past two sessions in response to news of increased traffic through the Strait of Hormuz. Despite this, both Brent and West Texas Intermediate (WTI) remain on track to close the week and month higher, each having added nearly 20% on a monthly basis.
Brent was last seen trading at $87.67 per barrel, while WTI traded at $82.07, down about 1% from Thursday. According to OilPrice.com, these declines follow reports of more tankers moving through the Strait of Hormuz, even as hostilities between Iran and the United States persist.
Market participants see ample supply waiting to enter the market once the current situation is resolved, capping any dramatic price rally, according to Again Capital partner John Kilduff. Although the number of tankers crossing Hormuz remains a small fraction of pre-conflict traffic, before the U.S. and Israel first struck Iran on February 28, any news of improved flow tends to push futures lower.
ING commodity strategists noted that reports of resumed oil shuttling across the strait are still in single digits, and such activity will not appear in tracking data because transponders are switched off. They also cited U.S. Energy Secretary Chris Wright as saying that roughly 13 million barrels per day were leaving the Persian Gulf.
The U.S. Strategic Petroleum Reserve is running low, and the Department of Energy has already indicated that releases will need to stop soon. The reserve has helped keep prices in check in recent months, but once draws end, prices are expected to climb. On the other hand, Saudi Arabia announced this week that it is seeking partners for a defense-strengthening coalition focused on the Bab el-Mandeb Strait and the Gulf of Aden.