Oil set for weekly gains after US threatens indefinite blockade of Iran

By Anushree Mukherjee

Aug 14 (Reuters) – Oil prices rose on Friday and were on track for weekly gains after the United States threatened an indefinite naval blockade of Iran, raising concerns about disruptions to crude supplies from the Middle East.

Brent futures were up 12 cents, or 0.14%, to $87.19 a barrel at 1047 GMT, while U.S. West Texas Intermediate crude futures were up 50 cents, or 0.62%, to $81.75 a barrel.

Brent and WTI were set for weekly gains of about 4.3% and 4.6%, respectively.

Higher oil prices are a natural result of the latest approach by the U.S., which implies little hope of a near-term resolution in the Middle East, Bjarne Schieldrop at SEB Research said.

On Thursday, the U.S. said it could maintain a naval blockade of Iran indefinitely and increase economic pressure on Tehran as ceasefire talks have stalled.

“Watch this space for more announcements coming next week because we are going to apply measures like have never been seen in the history of economic isolation of a country,” Treasury Secretary Scott Bessent told Newsmax’s “Rob Schmitt Tonight” programme in an interview. 

“A return to normal flows out of the Strait of Hormuz is now suddenly without any near-term hopes,” Schieldrop said.

TRAFFIC SLOWS THROUGH STRAIT OF HORMUZ

As both the U.S. and Iran made claims over control of the Strait of Hormuz, shipping traffic through the channel fell below the month’s average.

Before U.S.-Israeli attacks on Iran began the war at the end of February, the strait handled about one-fifth of global daily oil and liquefied natural gas supplies.

Two vessels from the state-owned Abu Dhabi National Oil Company were attacked transiting the strait on Thursday, UAE state news agency WAM said, an incident the UAE government condemned as an Iranian attack.

While Middle Eastern supplies are constrained, forecasts from OPEC pointed to weaker demand growth and U.S. crude inventories posted their largest weekly increase in more than 3-1/2 years.

“This week’s reports by the IEA and EIA were quite revealing. Storage is holding up much better than feared, which should pull oil prices lower,” said Norbert Rucker, head of economics and next generation research at Julius Baer.

(Reporting by Mohi Narayan in New Delhi and Helen Clark in Perth. Editing by Clarence Fernandez, Mark Potter and Barbara Lewis)