Oil gains 8% as Iran says Strait of Hormuz closure to continue

By Siddharth Cavale

NEW YORK, March 12 (Reuters) – Oil prices rose about 8% on Thursday as Iran stepped up attacks on oil and transport facilities across the Middle East, and the country’s supreme leader said the closure of the vital Strait of Hormuz should continue. 

Brent futures were up 8%, or $7.40, at $99.38 at 12:55 p.m. ET (1655 GMT), pulling back from a session high of $101.59. U.S. West Texas Intermediate crude also retreated about $3 from its peak, but still traded 8.6% higher at $94.81.

U.S. natural gas futures also edged up to a fresh four-week high on Thursday, due to the Iran war and as cooler weather boosted heating demand more than expected.

Oil prices remained under pressure on Thursday as uncertainty grew over how long the Strait of Hormuz, which runs past Iran’s coast and supplies a fifth of the world’s oil and liquefied natural gas, would stay closed. 

U.S. Energy Secretary Chris Wright told CNBC on Thursday that the U.S. Navy could not escort ships through the Strait of Hormuz now but it was “quite likely” that could happen by the end of the month.

Global oil prices are unlikely to hit $200 a barrel, Wright said, even as Iran continues to strike merchant ships.

Two fuel tankers in Iraqi waters were struck by explosive-laden Iranian boats, Iraqi security officials said on Thursday, while an Iraqi official told state media that its oil ports have completely stopped operations. 

Oman shifted all vessels out of its main oil export terminal at Mina Al Fahal outside the Strait of Hormuz in a precautionary move, a Bloomberg News report said.  

Brent hit $119.50 a barrel on Monday, its highest since mid-2022, then dropped after U.S. President Donald Trump said the Iran war could be over soon.

To combat rising prices, the Trump administration is considering waiving the century-old Jones Act for a limited period to ensure energy and agricultural shipments can move freely between U.S. ports, White House press secretary Karoline Leavitt said on Thursday.

“Trump is using every policy measure he can to keep prices low. … The lifting of the Jones Act is putting some downward pressure on the market today,” Phil Flynn, senior analyst at Price Futures Group said. The war is causing the biggest oil-supply disruption in the history of global markets, the International Energy Agency said on Thursday, a day after approving the release of a record volume of 400 million barrels of oil from strategic stockpiles.

A detailed breakdown has not been provided yet, so there is some skepticism in the market that the full volume will actually be released, Energy Aspects analysts said, adding that the total barrels of mostly crude and some products inventories is only equivalent to 25 days of the current disruption to flows.

SUPPLY HITS

Middle East Gulf countries have cut total oil production by at least 10 million barrels per day – a volume equaling almost 10% of world demand, the agency said in its latest monthly oil market report.

French oil major TotalEnergies said it has lost 15% of its oil and gas output as it shuts fields across the Middle East.

Middle East refineries have also shut in 2.35 million barrels per day of crude and condensate refining capacity, consultants IIR said.

Lebanon’s Hezbollah launched its biggest rocket salvo of the war on Wednesday night, prompting Israeli strikes that shook Beirut. Hezbollah’s attack also raised fears about Yemen’s Houthis joining the war alongside Iran, in a potential development that could further disrupt Red Sea shipping. 

Saudi Arabia has ramped up crude exports from its Red Sea port of Yanbu in recent days. 

China has ordered an immediate ban on refined fuel exports in March, a further step to preempt a potential domestic fuel shortage caused by the Middle East conflict, sources said on Thursday.

(Reporting by Siddharth Cavale in New York, Enes Tunagur in London, Sam Li in Beijing and Siyi Liu in Singapore; Editing by Pooja Desai, Kirsten Donovan, Will Dunham and Louise Heavens)