Oil extended its recent rebound after President Donald Trump made sweeping new demands on Iran, further clouding the outlook for a deal to reopen the crucial Strait of Hormuz.
Brent advanced toward $90 a barrel, up about 13% from a week ago. The US leader said demands for compensation from Iran for the people it has killed in conflicts would be part of “any, and all, future negotiations,” following Tehran’s requests for reparations from the war.
The hardening stance makes it unlikely the US and Iran will be able to reach a pact to reestablish shipping through the world’s most important energy chokepoint, which accounted for about a fifth of global oil and gas flows before the war broke out at the end of February.
“Donald Trump and Iran are both making demands that they know full well the other side will and cannot agree to,” said Ole Hansen, head of commodity strategy at Saxo Bank. “That basically points to a prolonged shutdown during which it makes little sense to trade the oil market with a short bias.”
Crude has been whipsawed by the Middle East turmoil in months of volatile trading, with fuel prices rallying even harder as the situation deteriorates again. Diesel has been particularly impacted as the Russia-Ukraine war also squeezes supplies, and benchmark prices in Europe have more than doubled this year.
A fire was reported on Tuesday at Rosneft’s Komsomolsk oil refinery in Russia’s Khabarovsk region, though the company said operations weren’t halted. Drone debris also caused a fire at an industrial facility in Russia’s Orenburg region, where ForteInvest’s Orsk refinery is located, according to a local statement. A refinery in Libya was also attacked.
The Middle East conflict has also spread to the Red Sea, where Iran-backed Houthi militants are threatening a shipping route that has become a lifeline for Saudi Arabia since the Iran war choked off exports from the Persian Gulf. Saudi Aramco has pushed back restarting its Jazan refinery to late August, following an attack claimed by the rebel group.
Further insights into global market conditions will come later Tuesday from the US Energy Information Administration, which is scheduled to issue its monthly Short-Term Energy Outlook. Commercial crude inventories in the country hit the lowest level since 2018 last month, while holdings in the Strategic Petroleum Reserve have sunk to the smallest in more than four decades.
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–With assistance from Charlie Zhu and Sarah Chen.
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