Business Recorder
HOUSTON: Brent futures for June delivery settled down more than USD3 on Tuesday following unconfirmed media reports that Iran’s president said the country was ready to end the war, assuming some guarantees were put into place. The Brent May contract was on track for a record monthly gain but it expired on Tuesday, with liquidity dropping as investors move their exposure to the more liquid June contract. Traded volumes for May futures were 18,652 lots, some 30 times lower than June. The Brent June contract settled down USD3.42 at USD103.97 per barrel, dropping after media reports, including from Bloomberg, that Iranian President Masoud Pezeshkian said Iran is ready to end the war but wants guarantees. READ MORE: Brent crude adds to record monthly gains with another surge Brent crude futures for May settled up $5.57, or 4.94 percent, at USD118.35 per barrel, while US crude futures settled down USD1.50 or 1.46 percent at USD101.38. Front-month Brent futures hit a record monthly gain of 64 percent in March, according to LSEG data dating back to June 1988. US benchmark West Texas Intermediate has gained around 52 percent in the month, its biggest jump since May 2020. “Once again the trap door under this market opened up with the alleged statement from the Iranian president, if there is an immediate end to hostilities then we know the Strait (of Hormuz) can be reopened and supply will come back on to the market, taking out a lot of the risk premium that has been built up in prices,” said John Kilduff, partner at Again Capital. The international benchmark has steadily risen over the last four weeks as the Iran war has escalated, with attacks across energy infrastructure throughout the Gulf that have resulted in the worst-ever oil-and-gas supply disruption. OPEC’s oil output plunged in March by 7.3 million barrels per day on a month-over-month basis to 21.57 million bpd, its lowest level since the height of the COVID-19 pandemic in June 2020, a Reuters survey found, amid forced export cuts.The market has vacillated throughout the month, with a series of dips each time US President Donald Trump suggests the military operation may be de-escalated - only to resume its upward path due to the supply impairment caused by Iran’s threats against vessels transiting the key Strait of Hormuz, the artery used to ship one-fifth of the world’s oil and gas. “With crude now in triple digits, price action is being driven less by new disruptions and more by expectations around intervention and supply response timing,” analysts at energy consulting firm Gelber and Associates said in a note. Trump has suggested other countries should intervene to open the strait, a move European nations have not wanted to take until hostilities cease. The US has removed sanctions on barrels from Russia and pledged reserve releases with a group of other nations, but those measures will only offset the supply loss for a limited period of time. “With the oil market’s remaining buffers gradually being consumed, the market’s vulnerability to a prolonged closure of (Hormuz) means that we are moving closer to physical oil shortages across a wider geographic scope, and the upward momentum for oil prices is likely to strengthen further,” said Lin Ye, a vice president for commodities markets and oil at Rystad Energy.
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