Crude oil is climbing as surging Chinese demand meets a tightening physical market. The Strait of Hormuz remains effectively shut amid the Iran-U.S. conflict, and market pricing now reflects a chance crude could hit a fresh all-time high by year-end.
Crude oil prices are rising worldwide as Chinese demand surges, with price spikes reaching from Congo to Brazil, according to a Bloomberg Markets report. The rally comes as the Strait of Hormuz stays disrupted by the Iran-U.S. conflict. Crypto Briefing, citing the Bloomberg report, described the resulting environment as a tight physical oil market.
China's import appetite lifts prices
China, the world's largest crude importer, can significantly influence global prices, and its current demand trends appear consistent with supportive pricing conditions across the oil market, the report said. Market pricing now reflects a possibility that crude oil could reach a new all-time high by the end of the year, participants suggest.
Strait of Hormuz stays under threat
The Iran-U.S. conflict, now in its seventh month, keeps the strait effectively shut to shipping, a key chokepoint for global oil supply since the war began Feb. 28 with American and Israeli airstrikes. U.S. forces have since struck three Iranian crude oil carriers, permanently disabling one off Kharg Island and one near Jask, while hitting another tanker in the Gulf of Oman, according to U.S. Central Command.
Iran plans to declare a new restriction zone outside the strait covering areas of the Gulf, Mohsen Rezaei of Iran's Supreme National Security Council said. Iranian parliament speaker Mohammad Bagher Ghalibaf warned that any future attack on the country would draw a response that is "faster, heavier, and more painful," according to CNBC.
U.S. Energy Secretary Chris Wright said Sunday that a nuclear agreement with Iran may never happen, adding uncertainty over how the conflict ends. Iran, the third-largest producer in OPEC, exported 90% of its crude through Kharg Island before the war, but those flows have been curbed by a U.S. blockade that began in mid-April.
Sources: Crypto Briefing, CNBC
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