Crude oil prices rallied again on Tuesday, with defiant comments by Iran’s president and the thawing of US-Chinese trade relations pushing oil prices higher, as Brent crude futures were up $1.35 per barrel to settle at $63.04 per barrel, while WTI was $1.07 higher at $54.02 per barrel.
Hassan Rouhani, Iranian President on Tuesday threatened to block all oil shipments through the Strait of Hormuz if the US tightens sanctions that squeeze Iran’s exports down to zero.
“The US should know that we are selling our oil… and it is not able to stop Iran’s oil exports,” Rouhani said, according to a report by state-owned news service IRNA. “And it should know if it intends to block our oil someday, no oil will be exported through the Persian Gulf,“ he further threatened.
The Strait of Hormuz at the mouth of the Persian Gulf is the world’s busiest oil chokepoint, with about 18.5 million barrels per day of crude and refined products, around 30 percent of all seaborne oil exports transited the 21-mile wide channel in 2016, according to the US Energy Information Administration.
Rouhani made a similar threat in July, in response to US calls to stop Iran’s oil exports completely.
Also, Chinese state-owned refiners were awaiting more instructions from Beijing before resuming US crude purchases while commodity trading houses began evaluating their options in the physical market after the trade truce that came out of US President Trump’s meeting with his Chinese counterpart Xi Jinping over the weekend.
Oil traders were cautious about resuming US crude supply to China due to market uncertainties and concerns over a narrow trading window until March, but market participants were keen to exploit the opportunity, anonymous traders’ said.
“Theoretically, imports from the US are unlikely to resume immediately due to the long trading cycle between the two countries, and the three-month window from January 1 is too short,” a Beijing-based crude oil trader said, citing risks of cargoes being stranded on the water.
But the Chinese government was likely to nudge state-owned companies to increase US crude imports to express sincerity following the trade deal, he added.