Oil prices steadied near a one-month high in choppy trade on Wednesday, as markets weighed the impact of the United Arab Emirates’ decision to leave the OPEC producer group and ongoing disruptions in the Middle East.
Crude prices had briefly rallied over 1% after a report said that U.S. President Donald Trump was preparing for an extended blockade of Iran-- move that could herald prolonged disruptions in Middle Eastern oil supplies.
Brent oil futures rose 0.2% to $111.51 a barrel by 01:01 ET (05:01 GMT), while West Texas Intermediate crude futures fell 0.3% to $99.63/barrel.
Both contracts surged over 3% on Tuesday and remained near their strongest levels since late-March.
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Trump preparing for prolonged Iran blockade- WSJ Trump has instructed aides to prepare for a prolonged blockade of Iran, the Wall Street Journal reported on Tuesday evening.
Trump opted to intensify efforts to choke Iran’s oil exports and further pressure the country into a deal, the report said.
The WSJ also reported that Trump rejected an Iranian proposal to reopen the Strait of Hormuz and end the war, with Washington demanding more curbs on Tehran’s nuclear program.
Tehran has largely decried the U.S. blockade and has called for its removal before any peace talks can take place. While Trump last week indefinitely extended a ceasefire with Iran, attempts at U.S.-Iran peace talks largely fell through.
A prolonged blockade against Iran likely heralds more disruptions in oil supplies from the region, given that Tehran has vowed to keep Hormuz blocked in response to U.S. aggression.
UAE leaves OPEC amid Iran war disruptions The UAE’s exit from OPEC– which will become effective on Friday– comes as a major blow to the oil producing group amid persistent disruptions from the Iran war.
The UAE said the move was to focus more on its “national interests.” But the move puts the country at odds with neighbor Saudi Arabia, the effective leader of the OPEC.
The country is largely expected to increase oil production, given that it has objected to OPEC production quotas in the past.
But with shipping through the Strait of Hormuz still blocked, any production increase is likely to come only after the reopening of the channel.
This scenario appeared distant, as Hormuz remained closed and as attempts at brokering more U.S.-Iran talks largely fell through.
Hormuz’s closure since late-February disrupted roughly 20% of the world’s oil supplies, sparking an extended surge in crude prices.
