Oil rises on reports US will extend Iran blockade, prolonging Mideast supply disruptions

BEIJING, April 29 : Oil prices rose on Wednesday, extending a multi-day rally, on reports the U.S. will extend its blockade of Iranian ports, likely prolonging supply disruptions from the key Middle East producing region.

U.S. President Donald Trump has instructed aides to prepare for an extended blockade of Iran, the Wall Street Journal reported late on Tuesday, citing U.S. officials.

Trump will opt to continue to squeeze Iran’s economy and oil exports by preventing shipping to and from its ports, the report said.   

Brent crude futures for June rose 52 cents, or 0.47 per cent, to $111.78 a barrel at 0154 GMT, climbing for an eighth day. The June contract expires on Thursday and the more active July contract was at $104.84, up 0.4 per cent.  

U.S. West Texas Intermediate (WTI) futures for June rose 57 cents, or 0.57 per cent, to $100.50 a barrel after gaining 3.7 per cent in the previous session, climbing for seven out of the last eight days.

“The recent rise in oil prices has been driven by the Strait blockade. If Trump is prepared to extend the blockade, supply disruptions would worsen further and continue to push oil prices higher,” said Yang An, an analyst at Haitong Futures.

Though there is a ceasefire in the U.S.-Israeli war with Iran, the conflict remains deadlocked while the sides seek a formal end to the fighting, with Iran shutting shipping flows through the Strait of Hormuz, a conduit for about 20 per cent of global oil and liquefied natural gas supplies, and the U.S. blockading Iranian ports.

The U.S. is pressing for an end to what it claims is Iran’s nuclear weapons programme while Iran is demanding some form of reparations from the latest round of fighting, an easing of economic sanctions and some form of control over the Strait of Hormuz.

The Hormuz shutdown is continuing to foster pulls from global inventories, with market sources saying late on Tuesday the American Petroleum Institute reported U.S. crude oil inventories fell for a second week.

Crude stocks fell by 1.79 million barrels in the week ended April 24, the sources said. Gasoline inventories fell by 8.47 million barrels, while distillate inventories fell by 2.60 million barrels.