- Oil prices firm after US announces Strait of Hormuz blockade following failed Iran talks
- Blockade affects all vessels entering or leaving Iranian ports from April 13, says US CENTCOM
- WTI crude support at $94-$90, resistance at $118-$120; Brent hits above $100 per barrel
Oil prices are expected to trade firm this week after US President Donald Trump announced a blockade of the Strait of Hormuz following the collapse of negotiations between Iranian and US officials in Pakistan. Sentiment was further boosted by traders increasing their long positions and by tightness in the physical market.
Daniel Hynes, senior commodities strategist at ANZ Research, said tensions will rise further after Trump warned that the US would impose a naval blockade on the strait. "Not only does this restrain exports from Persian Gulf oil producers, but it will also restrict Iran's ability to export oil and will exacerbate the supply disruptions the market is experiencing," he said.
The US Central Command, or CENTCOM, said in a statement that it will implement a blockade of all maritime traffic entering and exiting Iranian ports on April 13 at 10 a.m. US Eastern Time.
"The blockade will be enforced impartially against vessels of all nations entering or departing Iranian ports and coastal areas, including all Iranian ports on the Arabian Gulf and Gulf of Oman," it said. This pushed the price of New York-traded West Texas Intermediate crude and global benchmark Brent crude above the psychologically important $100-a-barrel mark on Monday.
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The risk premium tied to Hormuz, Iranian exports and possible retaliation remains alive. "Even without a full resumption of war, crude is likely to stay supported as long as the Strait remains a point of confrontation," said Charu Chanana, chief investment strategist at Saxo Bank, in a note to clients.
On the technical front, the WTI May crude contract has support at $94-$90 a barrel, while resistance stands at $118-$120 a barrel this week, said Pranav Mer, vice president of research, commodity and currency, at JM Financial. On the MCX April crude contract, support is seen at Rs 8,500-Rs 8,000 a barrel and resistance at Rs 11,200-Rs 11,500, he said.
Money managers increased their net long positions in NYMEX crude by 7,121 lots to 137,838 as of April 7, according to Commodity Futures Trading Commission data.
The number of rigs drilling for crude oil in the US remained flat at 411 in the week to April 10, Baker Hughes said in its weekly report.
Last week, crude oil prices fell sharply on prospects for peace talks between US and Iranian officials, raising hopes of diplomatic progress to end the disruption of supply from the Persian Gulf and reduce the risk premium.
This week, market participants will take cues from the OPEC monthly report, the International Energy Agency monthly report, the International Monetary Fund meeting, US consumer price inflation, China first-quarter GDP, speeches from Federal Reserve governors, and an update related to the US-Iran talks.
At 1:10 p.m. IST, the May contract of WTI crude oil was at $103.69 a barrel. The April contract on the MCX was 5.5% higher at Rs 9,658 a barrel. Meawhile, Brent June futures surged nearly 7% to $101.80 per barrel.
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