Crude oil soared by 3 per cent on Tuesday after the United States revoked the general license that authorised the sale of Iranian crude oil, amid reports of attacks on vessels near the Strait of Hormuz, reviving fears of disruptions to tanker shipping.
Brent crude futures chalked up $2.17 or 3.01 per cent to trade at $74.16 a barrel, while the US West Texas Intermediate (WTI) crude rose $1.89 or 2.76 per cent to $70.44 a barrel.
After the license was revoked, the US warned that Iran’s actions in the Strait of Hormuz were wholly unacceptable and would be met with consequences after attacks on tankers in the strategic waterway.
This comes as negotiators continued to work in good faith toward a final agreement with Iran despite the latest escalation.
The US move came after three tankers reported being struck by unknown projectiles in and near the Strait of Hormuz in recent days. The attacks and the US response threaten to put a fragile diplomatic understanding between America and Iran on shaky ground, raising the risk that further retaliation could derail negotiations over a broader agreement.
The Strait of Hormuz, a narrow waterway between Iran and Oman, is one of the world’s most important energy chokepoints, with roughly a fifth of global oil consumption and large volumes of liquefied natural gas (LNG) shipments passing through each day.
Any fresh disruption amid recent recovery could push up energy prices and increase pressure on consumers and governments already facing higher fuel costs.
Ukraine landed one of its most consequential blows yet against Russia’s energy sector, knocking out the country’s largest oil refinery just as the country is scrambling to contain a widening fuel crisis.
Also on Tuesday, Ukraine said its drones struck eight tankers from Russia’s shadow fleet of ageing vessels used to bypass sanctions.
Gulf oil producers are offering discounts to entice buyers, with Saudi Arabia’s latest price cut for Asian importers the sharpest in decades but unlikely to boost sales.
According to Reuters, Saudi Arabia cut its official selling price for crude to Asian buyers by as much as $11 per barrel, but other Gulf exporters are cutting even deeper in order to sell their barrels that have sat in the Gulf for over three months.