Source : INDIA TODAY NEWS
Global oil prices rose and worries over fuel costs returned on Wednesday as a fragile truce between the United States and Iran showed signs of unravelling, raising fears that prolonged fighting could disrupt tanker movement through the Strait of Hormuz.
The latest tension came after President Donald Trump said the US ceasefire with Iran was over, following Iranian attacks on commercial ships in the strait and on American military sites in other Gulf countries. Shipping authorities warned that the situation remained volatile, while analysts said markets were reacting to the risk around one of the world’s most important oil transit routes.
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US benchmark crude rose to USD 75.80 a barrel on Wednesday, its highest level in more than two weeks. Brent crude, the international benchmark, climbed to nearly USD 79 a barrel, its highest since June 19. “Tanker traffic through the Strait of Hormuz has essentially stopped, which tells you more about risk perception right now than any statement from Washington or Tehran,” Jorge Leon, head of geopolitical analysis at Rystad Energy, said in an email. “Oil markets reacted quickly to the renewed geopolitical risk.”
Leon said the market reaction “highlights how sensitive prices remain to any escalation around the strait, given its role as a critical transit route for global oil flows”. In the US, the average price of regular petrol rose slightly to USD 3.80 a gallon on Wednesday from USD 3.79 a day earlier, though it was still well below the month-ago average of USD 4.16, according to AAA.
Crude oil makes up most of the price of petrol, and higher oil prices usually take time to be reflected at filling stations because refiners use oil bought in advance and the fuel then moves through pipelines and trucks before reaching pumps. Petrol pump owners also sometimes absorb part of the increase for a while to stay competitive instead of passing it on immediately.
To contain high oil prices during the war, the US and other countries began releasing oil from emergency stockpiles in March. But those reserves are limited. The US Strategic Petroleum Reserve held 319.5 million barrels as of July 3, the lowest level since 1983, when the reserve was still being filled. “Unfortunately, the drawdown of strategic stocks means that there is a lot less ammunition in Trump’s holster,” said Michael Lynch, a distinguished fellow at Energy Policy Research Institute in Amherst, Massachusetts.
Fresh concern over shipping also spread across the wider region. A day after the US accused Iran of striking three commercial vessels and revoked the country’s ability to openly sell crude oil on the world market, some urged the shipping industry to rethink whether it was safe to send crewed vessels through the Strait of Hormuz and the wider Middle East.
International Maritime Organization Secretary-General Arsenio Dominguez condemned the attacks. “As long as the safety and security of crews cannot be assured, I urge flag states, shipowners, operators and all relevant authorities to avoid exposing seafarers to unnecessary danger by transiting the strait,” Dominguez said on Wednesday. “The situation in the region remains volatile.”
Some traffic still moved through the strait on Tuesday, according to Kpler, which recorded 41 crossings compared with 36 on Monday. It was not clear whether those crossings took place before or after the strikes. Some vessels are also going “dark” while passing through the strait and not broadcasting their positions, making a full count more difficult. With the central route through the strait unusable because of mines, ships have been using two other channels: a smaller northern route through Iranian waters and a southern route through Omani waters. The three ships struck on Tuesday appeared to have been using the Omani route.
Ben May, director of global macroeconomic research at Oxford Economics, said the ceasefire was likely to remain uneven, with Washington and Tehran still able to step back from a return to war. “The question is whether the latest developments merely represent a bump in the road or if we’re emerging from the eye of the storm,” he wrote in a research note. “While Trump said negotiations with Iran were a waste of time’, he maintained an off-ramp by noting that US negotiators would continue talks with Iran, suggesting the truce hasn’t been irrevocably broken.”
The renewed uncertainty over the Strait of Hormuz came after Maersk and Hapag-Lloyd said on Monday that their Gemini Corporation partnership would gradually resume services in the Suez Canal, which had been paused because of Houthi attacks in the Red Sea. Recent stability in the Middle East had allowed that decision, but “the recent deterioration could put this resumption in jeopardy once again,” said Judah Levine, head of research at freight booking platform Freightos. Hapag-Lloyd said on Wednesday that the decision had been taken after “thorough assessments of the security situation in the Red Sea area” and that “if the situation changes or deteriorates, contingency plans are in place”.
In sum, the renewed strain in the US-Iran truce pushed up oil prices, raised fresh concerns about fuel costs and prompted new warnings over the safety of shipping through the Strait of Hormuz, a route central to global oil trade.
With PTI Inputs
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SOURCE :- TIMES OF INDIA
