Crude oil futures traded higher on Monday morning after the US attacked military assets on Kharg Island over the weekend.
At 9.59 am on Monday, May Brent oil futures were at $104.60, up by 1.42 per cent, and May crude oil futures on WTI (West Texas Intermediate) were at $97.80, up by 0.99 per cent.
March crude oil futures were trading at ₹9230 on Multi Commodity Exchange (MCX) during the initial hour of trading on Monday against the previous close of ₹9052, up by 1.97 per cent, and April futures were trading at ₹9141 against the previous close of ₹8943, up by 2.21 per cent.
In their Commodities Feed for Monday, Warren Patterson, Head of Commodities Strategy of ING Think, and Ewa Manthey, Commodities Strategist, said oil prices opened stronger on Monday morning, with ICE Brent trading as high as $106.50 a barrel.
US strikes over the weekend on Kharg Island raised supply concerns, as most of Iran’s oil exports pass through it. However, strikes appear to have targeted military infrastructure rather than energy infrastructure. It still poses supply risks, particularly given that Iranian oil is about the only oil moving through the Strait of Hormuz.
“Targeting Iranian oil infrastructure only increases the risk that Iran will further target regional energy infrastructure. This would potentially prolong the recovery of oil flows, even if the Strait of Hormuz reopens,” they said.
In the UAE, loading operations at Fujairah port were suspended following a drone attack on Saturday. The port is outside the Strait of Hormuz, so any disruption to oil loadings would lead to further market tightening. There are reports that operations have already resumed, they said.
Stating that the International Energy Agency (IEA) released further details of the record 400 million barrels coordinated release from emergency stockpiles, they said the total volumes to be made available are just shy of 412 million barrels.
Member countries in Asia will make oil available immediately, while the Americas and Europe will only become available from the end of March.
“The urgency of releasing volumes in Asia makes sense; the region is more reliant on oil flows through the Strait of Hormuz. Yet Asia’s share of the coordinated release is only 26 per cent. So, the market will have to wait a bit longer for more meaningful volumes to come through from Europe and the Americas,” they said.
Regarding the 172 million barrels the US will release, the Department of Energy clarified that they will be structured as an exchange rather than an outright sale.
Buyers would have to return barrels to the Strategic Petroleum Reserve (SPR) at a later date, adding interest/premium for the barrels.
Structuring the release as an exchange likely reflects US concerns about refilling the SPR further down the road, had it been an outright sale. An exchange adds another layer of complexity for recipients of SPR volumes, as they must return barrels, they said.
Meanwhile, US President Donald Trump has requested other countries to help protect Strait of Hormuz from Iranian attacks.
In a post on the social media platform Truth Social, Trump said: “The United States of America has beaten and completely decimated Iran, both Militarily, Economically, and in every other way, but the Countries of the World that receive Oil through the Hormuz Strait must take care of that passage, and we will help — A LOT! The U.S. will also coordinate with those Countries so that everything goes quickly, smoothly, and well. This should have always been a team effort, and now it will be — It will bring the World together toward Harmony, Security, and Everlasting Peace!”
March natural gas futures were trading at ₹287.50 on MCX during the initial hour of trading on Monday against the previous close of ₹291.90, down by 1.51 per cent.
On the National Commodities and Derivatives Exchange (NCDEX), March guargum contracts were trading at ₹9980 in the initial hour of trading on Monday against the previous close of ₹9893, up by 0.88 per cent.
March jeera futures were trading at ₹21695 on NCDEX in the initial hour of trading on Monday against the previous close of ₹21880, down by 0.85 per cent.