Oil prices increased sharply on Monday as peace negotiations between Iran and the United States showed signs of stalling. Brent crude, a major international oil price benchmark, climbed over 5% to about $93 per barrel, marking its most significant rise in nearly a month. Similarly, West Texas Intermediate crude saw a rise of over 6%, also reaching approximately $93 per barrel, experiencing its largest uptick since late April. Despite these gains, prices are still below the highs seen during wartime.
The discussions between Iranian and American representatives have focused on extending a ceasefire and reopening the Strait of Hormuz, a key conduit for global oil and other commodities. Recent hostilities between Iran, the United States, and Israel have jeopardized these talks, with fresh threats and attacks reported.
Last weekend, U.S. forces launched attacks in Iran, which were part of a spate of assaults over the past week. In retaliation, Iran’s Revolutionary Guards struck a U.S. air base, responding to an American assault on a communication facility. The ongoing conflict has sparked concerns about the world’s ability to maintain its oil reserves if the strait remains closed.
“There has been quiet panic building,” explained Helima Croft, head of global commodity strategy at RBC Capital Markets.
The conflict has led Persian Gulf nations to cut oil production by more than 14 million barrels daily, accounting for around 14% of the global supply before the war, according to the International Energy Agency. Various efforts have somewhat lessened the blow of this supply deficit. China has been importing less oil than usual, and numerous countries have tapped into their emergency reserves of oil and fuels. Additionally, nations like the United States, Canada, and Brazil have increased their oil exports, as outlined by the I.E.A. Elevated prices have also led to reduced oil demand.
However, energy executives and analysts are growing increasingly worried about dwindling reserves of oil and fuels, such as gasoline and diesel.
“We’re approaching unheard-of inventory levels. I mean, incredibly low levels. There’s room for debate whether this will occur in two or three weeks,” stated Neil Chapman, a senior vice president at Exxon Mobil, during a recent conference. “But once you reach that point, you’ll see price spikes.”
Chapman did not clarify whether his comments referred to crude oil inventories or specific fuels.
The U.S. is withdrawing about nine million barrels of oil weekly from its federal reserves. At this extraction rate, the country’s strategic reserves are set to hit their lowest since 1983 by next week, according to a review by the New York Times, using data from the Energy Information Administration, a division of the Energy Department.
“That’s a debt we’ll have to pay back,” remarked Amos Hochstein, former advisor on energy and foreign policy in the Biden administration.
Rebecca F. Elliott and Joe Rennison reported on energy and financial markets for The Times, respectively, providing insights into the current oil market fluctuations.