Oil prices settled up nearly 5 per cent on Wednesday as fresh attacks on ships in the Strait of Hormuz worsened supply disruption fears, and analysts said the International Energy Agency’s proposal for a record release of oil reserves is inadequate to ease those worries.
Brent futures rose $4.18, or 4.8 per cent, to settle at $91.98 a barrel, while US West Texas Intermediate ended the session up $3.80, or 4.6 per cent, at $87.25 a barrel. Three more vessels have been hit by projectiles in the Strait of Hormuz, maritime security and risk firms said on Wednesday.
That brought the number of ships struck in the region to at least 14 since the Iran war began. Shipping along the narrow strait has come to a near standstill since the United States and Israel began strikes on Iran on February 28, preventing exports of around a fifth of the world’s oil supply and sending global oil prices surging to highs not seen since 2022. President Donald Trump has said the United States is prepared to escort tankers through the Strait of Hormuz when necessary.
However, sources told Reuters the US Navy has refused requests from the shipping industry for military escorts as the risk of attacks is too high for now. The IEA, meanwhile, recommended the release of 400 million barrels of oil, the largest such move in its history, to try to rein in energy prices, which are now up more than 25 per cent since the war began.
The time frame for the release will be decided in due course, the IEA said. The proposed volume is more than double the 182 million barrels released in 2022 following Russia’s invasion of Ukraine, but analysts said it was ultimately insufficient to resolve supply losses from a prolonged war in the Middle East.
The proposed release is roughly equal to about four days of global production and 16 days of the volume of crude that transits through the Gulf, Macquarie analysts estimated.
“If that doesn’t sound like much, it isn’t,” the analysts said in a note.
Oil prices also shrugged off a US government report that showed crude oil stockpiles in the top oil-producing country had grown more than expected last week. US gasoline and distillate fuel stocks, which include diesel and jet fuel, dropped more than expected, the report showed.
Supply concerns remain
Abu Dhabi state oil giant ADNOC has shut its Ruwais refinery in response to a fire at a facility within the complex following a drone strike, according to a source, marking the latest energy infrastructure disruption due to the Iran war. Saudi Arabia, the world’s largest oil exporter, is seen boosting supplies via the Red Sea, although they are still far below the levels needed to compensate for the drop in flows from the Strait of Hormuz, shipping data showed.
The kingdom is relying on the Red Sea port of Yanbu to help it boost exports to avert steep production cuts as its neighbors Iraq, Kuwait and the United Arab Emirates have already reduced output. Energy consultancy Wood Mackenzie said the war is currently cutting Gulf oil and oil products supply to the market by some 15 million barrels per day, which could raise crude prices to $150 per barrel.
“Even a quick resolution probably implies weeks of disruption for energy markets yet,” Morgan Stanley said in a note.
