Alexander Manjuk | Reuters
U.S. oil prices rose more than 3% on Tuesday after reports that President Donald Trump was unhappy with Iran’s proposal to reopen the Strait of Hormuz.
Investors also focused on OPEC after the United Arab Emirates announced it would leave the group starting Friday.
west texas intermediate Futures rose more than 3% to close at $99.93 per barrel. international benchmark brent Futures rose nearly 3% to settle at $111.26.
Trump told advisers he was not satisfied with Iran’s proposal to open the strait and end the war, people briefed on the matter told The New York Times. The Times said it was unclear exactly why the president did not like Iran’s proposal.
Iran has offered to reopen the strait if the US lifts its naval blockade. But the Iranian government wants to postpone discussions about its nuclear program to a later date.
Secretary of State Marco Rubio expressed skepticism about Iran’s proposal in an interview with Fox News on Monday. Rubio said Iran was prepared to reopen the strait only if Iran still controlled the sea lanes.
“This is not the opening of the strait. It’s an international waterway. We cannot normalize a system where Iranians decide who can use international waterways and how much they have to pay, and we cannot tolerate them trying to normalize it,” Rubio said.
US crude oil prices since the beginning of the year
Energy flows through the Strait of Hormuz, which carries about a fifth of the world’s oil and liquefied natural gas, remain severely disrupted, affecting about 20 million barrels of crude oil, fuel and petrochemical products, said Andy Lipow, president of Lipow Oil Associates.
Even if hostilities end immediately, it will take months for normal market conditions to return, Lipow said, adding that mines must be cleared, tankers decongested and production and refining restarted in stages.
He estimated that it would take at least four to six months for the oil market to stabilize, taking into account shipping and distribution delays, and that prices were likely to remain high during that time as inventories approached critical levels.
He added: “The longer the conflict lasts, the higher prices will rise, especially as inventories are drawn down to critical operating levels. If the conflict were to end tomorrow, it is estimated that oil prices would fall by $10 per barrel.”
