US crude oil futures surged almost 2% on Tuesday, topping $83 per barrel. Investors reacted to news that Iran will not reopen the Strait of Hormuz until its conditions are met, leading to expectations that the conflict is at a stalemate.
September West Texas Intermediate (WTI) crude oil futures rose $1.32, or 1.61%, to $83.45 per barrel at 19:29 GMT on Tuesday on the New York Mercantile Exchange. US oil prices are up 11% this week and have rocketed 45% year-to-date.
Brent, the global benchmark for oil prices, is close to reclaiming $90. October Brent crude futures jumped $0.39, or 0.44%, to $89.30 a barrel on London’s ICE Futures exchange. Brent is also up about 46% this year.
Tehran officials have submitted a series of demands before reopening the narrow waterway between Iran and the Arabian Peninsula. Some of these demands include reparations and the unfreezing of Iranian funds held overseas.
Despite both sides being unable to reach a solution, Pakistan’s Defense Minister Khawaja Asif told Bloomberg News that “things are shaping up again in favor of a peace arrangement or a deal.”
“The flare up caused oil prices to surge on the perception that there is going to be no way we’re going to get a negotiated end to this drama,” Phil Flynn, energy strategist at The PRICE Futures Group, said in a Tuesday note. “Oil prices pulled back a bit on headlines foreign minister said negotiations between Oman and Iran are in an advanced stage and dropped even further after reports came out that Pakistan’s interior minister arrived in Iran for talks.”
Conditions remain bullish for global oil markets as commercial vessels through the Gulf channel continue to be tepid. Industry data suggest that just eight ships crossed the global chokepoint this week.
The White House estimates that oil exports through the Strait of Hormuz average about nine million barrels per day, based on a seven-day moving average, with assistance from the US military.
President Donald Trump has attempted to alleviate the situation by extending the suspension of the Jones Act, a century-old shipping law that mandates the transport of goods between American ports on US vessels.
In other energy commodities, September natural gas futures fell $0.046, or 1.65%, to $2.748 per million British thermal units (Btu). September gasoline futures ticked up $0.0136, or 0.43%, to $3.149 a gallon. September heating oil futures surged $0.0854, or 2.04%, to $4.2752 per gallon.
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