Asian oil refiners are actively seeking to buy more US crude as a direct consequence of intensified hostilities between the United States and Iran, which has significantly hampered oil traffic through the Strait of Hormuz. Executives involved in both selling US oil and procuring for Asian processors have confirmed that negotiations for spot sales of American cargoes have resumed.
This shift in demand comes after a recent period where key US oil grades experienced significant price reductions. For instance, the US sour crude benchmark Mars fell to its lowest level since early 2023, while oil prices in Houston reached levels not seen since the Covid-19 pandemic. This earlier decline was attributed to an easing of the "Iran War Premium" as crude flows through the Strait of Hormuz improved and a prior spike in demand for American exports faded.
However, the current escalation has rapidly reversed this trend, pushing global oil prices higher. Brent crude futures, the international benchmark, crossed the $100 per barrel mark, closing at $100.69, a gain of about 7%. US West Texas Intermediate crude also saw a significant increase, advancing about 6% to settle at $92.19. Oil prices have surged over 30% this month due to the rapidly escalating conflict in the Middle East. Analysts warn that Brent crude could surpass its 2022 high of $128 per barrel or even its 2008 peak of $146 per barrel in a worst-case scenario of full-scale regional conflict.
Further contributing to market volatility are other geopolitical factors. Attacks on tankers in the Red Sea by Iran's Houthi allies and renewed threats of US military action against Iran have heightened concerns. Additionally, the ongoing conflict in Ukraine has impacted global oil markets, with Kyiv reportedly attacking over 150 tankers in the Black Sea and Sea of Azov, leading to the suspension of crude loading at the Caspian Pipeline Consortium terminal, which exports approximately 80% of Kazakhstan's crude. Meanwhile, US refiners are increasing diesel production to near-record levels, and American fuelmakers are importing the most Venezuelan oil in almost a decade to hedge against risks like Canadian wildfires, with July imports projected to hit 804,000 barrels a day.
