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Oil prices rose on Tuesday to their highest in four weeks, after the US reimposed an embargo on Iranian shipping and renewed tensions between Washington and Tehran raised concerns about power flows in the Strait of Hormuz.
Brent crude rose to its highest since June 12 and West Texas Intermediate (WTI) to its highest since June 16 – before the United States and Iran signed a deal to end the conflict on June 17.
Brent crude futures rose $2.89, or 3.47 percent, to $86.19 per barrel in the US at 7:58 am ET, while WTI crude, the US standard, rose $1.53, or 1.96 percent, to $79.67 a barrel.
That is above where the prices have been in recent weeks, when the barrel of Brent crude falls in the low range-$70 a barrel range, but below the high level seen at the beginning of the war, when it exceeded 110 dollars.
“Despite signing a memorandum of understanding and having an agreement, this didn’t even last for a few weeks. So that’s the concern the market is trying to call in right now,” said ANZ analyst Soni Kumari.
“What we think is that the peak of the increase is behind us, but there are higher risks to oil prices if this disruption continues, and that will keep prices in the $85-$90 range.”
That also sends fuel prices down. In Canada, the average pump price is $1.665 a litre, 2.5 cents above last week’s average, according to price tracking site GasBuddy.com.
Several grocers have warned retailers of fuel surcharges due to rising fuel costs, and that could mean even higher prices on your next grocery shopping trip.
Hostilities between the United States and Iran intensified this week, as US President Donald Trump returned the ban on Iranian shipping and proposed a 20 percent tariff to lease the Strait of Hormuz.
The waterway is an important artery in the world’s energy trade, carrying about a fifth of daily oil and liquefied natural gas before the conflict began.
In these strikes, one Indian crew member was killed and eight were injured when an Emirati oil tanker was hit by an Iranian cruise missile in the Strait of Hormuz, the United Arab Emirates Ministry of Defense said.
Shipping data on Monday also showed that the number of tankers passing through the Strait of Hormuz fell in the previous day to the lowest level in two months.
Citi said in its poll that the possibility of the Iranian regime withdrawing from the memorandum of non-performance until after the US mid-term elections has also increased, a situation that could increase significantly with long-term oil prices.
The United States and Iran have again attacked the Strait of Hormuz less than a month after signing the first agreement to end the war. This comes as the US military says it plans to reimpose its blockade of Iranian ports on Tuesday.
Oil exports to Iran continue as normal despite last week’s lifting of the 60-day waiver of US oil sanctions, oil minister Mohsen Paknejad said on his official Telegram account.
Elsewhere, Yemen’s Houthis fired missiles at Saudi Arabia after accusing the regime of bombing an airport it controls on Monday. The Houthis have also announced a ban on Israeli shipping in the Red Sea, and if they extend the ban to the Bab el-Mandeb strait it is connected to, experts worry that it could reduce the flow of oil.
“If the Houthis expand their attacks on Saudi crude oil production in the Red Sea, it could pose (continued) uncertainty about the flow of crude from the region,” Simon Wong, portfolio manager at Gabelli Funds, said in a statement.
