Brent trading above $90/bbl as Iran threatens to shut Strait of Hormuz

The front-month ICE Brent contract has climbed $1.07/bbl higher on the day, to trade at $90.80/bbl at 09.00 GMT.

PHOTO: Getty Images

Upward pressure:

Brent has surpassed $90/bbl this week amid heightened geopolitical tensions in the Middle East and fears of supply disruptions.

Iran has threatened to restrict access to the Strait of Hormuz in retaliation for recent Israeli attacks on Syria. “The Strait of Hormuz is the world's most important oil chokepoint because large volumes of oil flow through the strait,” the US Energy Information Administration (EIA) said. Around 20% of global oil supply transits through this strait daily, according to the EIA, and disruptions could have severe knock-on impacts on the global oil market.

“We remain bullish on oil but don’t expect it to reach $100,” energy-focused hedge fund investor Eric Nuttall told Bloomberg. He argues that the oil market is “fundamentally tight” as demand remains strong despite concerns over the US economy, that US shale supply growth is under pressure, while OPEC+ is cutting supply.

Downward pressure:

Commercial crude oil inventories in the US grew by 5.84 million bbls on the week to 457 million bbls on 5 April, according to the EIA. This is its highest level since July last year.

US consumer price inflation strengthened in March, according to the latest Consumer Price Index data that was released on Wednesday by the Bureau of Labor Statistics. The tug of war between rising inflation in the US and the Federal Reserve's interest rate dilemma remains a metaphorical chink in Brent's armour.

Higher consumer price inflation in the US could lead the Federal Reserve to delay interest rate cuts, which could contribute to dent oil demand in the US.

By Konica Bhatt

Please get in touch with comments or additional info to news@engine.online