(RTTNews) – Extending the three previous sessions of gains, crude oil prices have soared on Wednesday with expectations for a diplomatic breakthrough in the ongoing U.S.-Iran crisis fading while the closure of Strait of Hormuz continues, intensifying supply disruption concerns for a protracted period.
WTI Crude Oil for September month delivery was last seen trading up by $1.18 (or 1.39%) at $86.12 per barrel.
The Memorandum of Understanding signed between the U.S. and Iran on June 17 expired on Monday. The MoU offered a 60-day truce for both the nations to explore peaceful measures to end their mutual hostilities.
Investors were anticipating an extension of the MoU and a possible early reopening of the Strait of Hormuz followed by an end to the U.S.-Iran conflict through extensive discussions. Of note, the war began in late February and is now in its sixth month.
However, U.S. President Donald Trump announced that the U.S. was not very keen on renewing the MoU and did not allow its extension. Trump also asserted that the U.S. controls the Strait of Hormuz, which Iran had shut as soon as the war broke out.
Of late, Trump repeatedly stated that the U.S. and Iran are holding backchannel negotiations despite Iran’s consistent denial.
Iranian leaders announced that Iran and Oman were on the verge of closing a deal to manage the shipping traffic across the Strait of Hormuz and that the talks did not involve the U.S.
Trump warned Oman that the U.S. would bomb the nation if it intervened in the U.S.-Iran dealings.
Iran’s top negotiator Mohammad Bagher Qalibaf stated that the Strait of Hormuz will not be reopened until the U.S. meets Iran’s demands.
Yesterday, Trump shocked analysts by announcing through Truth Social that no negotiations were going on with Iran and none scheduled.
Trump also added that the U.S. naval blockade on Iranian ports is in full force and effect and that the Strait of Hormuz is open and operative, cleared of all sea mines laid by Iran in the early months of the war.
In addition, Trump posted an image through Truth Social depicting a map of the Hormuz region which highlighted the critical seaway as “NEW U.S. Territory.”
The impasse in U.S.-Iran talks has left the Strait of Hormuz closed, and the heated exchange of rhetoric has diminished expectations of the U.S. and Iran coming together to resolve disputes peacefully.
On Wednesday, Reuters quoted Kpler data as showing that six commodity vessels crossed the Strait of Hormuz on Tuesday, down from nine a day earlier, falling below the 10-day daily average which stands at 11.
However, through the Bab el-Mandeb Strait on the Red Sea where the Iran-aligned Yemen’s Houthi militants have enforced a blockade on Saudi Arabia linked vessels, weekend transits stood at 30, up from the 19 of the prior week though no Saudi-connected shipments were tracked.
Separately, quoting Kpler, CNN reported that more than 80% of vessel transits through the Strait of Hormuz over the past two weeks happened through the Omani route.
On the inventory front, according to the American Petroleum Institute, U.S. crude oil inventories fell by 328,000 barrels for the week ending August 14, following a 9,070,000-barrel increase of the previous week.
Commercial crude inventories excluding the Strategic Petroleum Reserves have declined by just over 49,000,000 barrels over the past 18 weeks, while inventories are up 1,880,000 barrels year-to-date.
According to the U.S. Energy Information Administration, for the week ending August 14, crude oil inventories increased by 4,405,000 barrels to 428,800,000 barrels. At Cushing’s Oklahoma Delivery Hub, the inventories decreased by 1,314,000 barrels.
For the same period, while gasoline inventories increased by 688,000 barrels, distillate inventories decreased by 1,530,000 barrels, and heating oil inventories decreased by 537,000 barrels.
The U.S. dollar index was last seen trading at 98.91, down by 0.73 points (or 0.73%) today.
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