Oil Breaks US$103, Hormuz Still Makes Prices Volatile

Strait of Hormuz. (DOK European Space Agency (ESA) via Wikimedia Commons)

JAKARTA - Oil prices have risen again as the Strait of Hormuz is not completely safe. Iran's offer to open the important route has not been enough to calm the market because the US blockade is still running.

As reported by Anadolu Agency, Tuesday, April 28, Brent crude oil was trading at US$103.55 per barrel on Tuesday at 09.43 local time or 06.43 GMT. The figure was up around 1.8 percent from the previous close, US$101.69 per barrel.

The United States benchmark oil, West Texas Intermediate or WTI, also rose about 1.8 percent to US$98.15 a barrel. In the previous session, WTI was at US$96.37 a barrel.

The price increase comes as investors still watch the situation in the Strait of Hormuz. This route is important because it is used by about a fifth of the world's oil and liquefied natural gas supplies.

US President Donald Trump is reportedly dissatisfied with Iran's proposal to reopen the Strait of Hormuz and end the US-Israeli war against Iran. Tehran's plan also includes ending the US blockade on the route.

The New York Times reported that Trump received an explanation of the proposal during a meeting at the White House Situation Room on Monday. However, the proposal did not touch on Iran's nuclear program.

Iran has previously rejected US demands to halt all uranium enrichment. Tehran says it has a right to enrichment under international law and has so far refused to hand over enriched uranium.

UN Secretary-General Antonio Guterres has joined in urging the Strait of Hormuz to be reopened amid the deadlock in US-Iranian peace talks.

"Open the strait. Let the ships pass. Without levies. Without discrimination. Let trade resume. Let the global economy breathe," Guterres said in a debate of the UN Security Council on maritime security.

The Strait of Hormuz has been heavily disrupted since early March after the US and Israel launched a joint attack on Iran on February 28. The war is now temporarily halted, while efforts to permanently end it are still underway.

The risk of disruption is not gone. CENTCOM said US warships prevented a crude oil tanker from sailing to an Iranian port over the weekend. It was the latest interception in the ongoing blockade.

Traders are still wary of new disruptions in the Strait of Hormuz. As long as the blockade and diplomatic efforts go hand in hand, pressure on oil prices is expected to remain strong.