Tankers sail in the Gulf, near the Strait of Hormuz, as seen from northern Ras al-Khaimah, near the border with Oman’s Musandam governance, on March 11. Iran has pledged to keep the strait blocked.Stringer/Reuters
Oil prices eased on Monday on hopes that U.S. President Donald Trump could cajole allies into providing naval support to reopen the Strait of Hormuz to tanker traffic.
So far, global leaders have been reluctant to agree to patrol the key Persian Gulf waterway, through which about a fifth of the world’s oil is shipped. Iran has pledged to keep the strait blocked with missiles, drones and mines in response to the U.S. and Israeli bombardment of the Islamic Republic, now into its third week.
Oil prices have surged to four-year highs since the start of the attacks, and Iran’s retaliations, raising fears of energy shortages and a global recession, with the cost of products such as jet and diesel fuel soaring.
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On Monday, British Prime Minister Keir Starmer said Britain is working with allies on a plan to open the Strait of Hormuz, but he offered few specifics and no timetable. Mr. Trump had called on NATO members to help open the strait. Nonetheless, Mr. Starmer ruled out any actions being a NATO mission.
International benchmark Brent crude fell about 3 per cent to close the session at US$100.21 a barrel on Monday. West Texas Intermediate crude sank 5 per cent to US$93.50 a barrel. Despite the easing, prices remain nearly 40 per cent higher than before the war began.
Peter Tertzakian, Calgary-based author and founder of Studio.Energy, said the risks in the oil market will escalate in the next week or two, should the strait remain too dangerous for tanker traffic. Countries in Asia as well as Australia have already started to ration some petroleum products, and each day without replenished supplies is negative for long-term supply chains.
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It takes three to four weeks for a cargo of crude to sail to, say, Japan from the Persian Gulf, Mr. Tertzakian pointed out. “So, you have a supply chain of tankers that are still en route. But they’re not leaving anymore, so the tail end of that supply chain is going to run out,” he said in an interview.
Plans by the member states of the International Energy Agency to release strategic reserves are aimed at helping to fill some of that void. Last week, the 32 IEA members agreed to release 400 million barrels of crude from strategic reserves over the next three to six months. However, analysts have cautioned that won’t make up for all of the 20 million barrels per day that has been unable to reach markets as a result of the conflict.
Canada has agreed to make 23.6 million barrels available, mostly through production and logistical tweaks. As a net exporter, the country is not required by the IEA to hold emergency reserves.