Oil prices have failed to ease despite United States President Donald Trump’s announcement that the US will “guide” stranded vessels out of the Strait of Hormuz.
Brent crude, the international benchmark, was essentially flat on Monday morning, as traders saw little hope of Trump’s plans resolving what the International Energy Agency has called the biggest energy disruption in history.
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Brent futures for July stood at $108.11 as of 05:00 GMT, down 0.06 percent.
Trump said on Sunday that the US would “help free up” vessels stranded in the Gulf from Monday, but offered few details on how the operation, dubbed “Project Freedom”, would work.
Trump did not specify whether the plan would involve escorts by the US Navy, a proposal previously shot down by administration officials, who cited the need to make further preparations for such operations.
US Central Command said in a later statement that it would “support” vessels seeking to transit the waterway, without making any reference to naval escorts.
The command said that guided-missile destroyers, more than 100 land- and sea-based aircraft, multi-domain unmanned platforms, and 15,000 service members would be involved in supporting the effort.
Senior Iranian officials have signalled that Tehran will not cooperate with Trump’s plan, casting further uncertainty over the fragile ceasefire in place between the sides since April 7.
Ebrahim Azizi, the head of the Iranian parliament’s National Security Commission, on Sunday warned that any “American interference” in the strait would be considered a breach of their truce.
On Monday, the United Kingdom’s military said it had received reports of a tanker being struck by “unknown projectiles” off the coast of the United Arab Emirates, hours after a bulk carrier reported being attacked by multiple small craft off Iran.
Neither of the crews involved in the incidents was harmed, according to UK Maritime Trade Operations (UKMTO).
“The market is becoming accustomed to some of Trump’s posts about progress on Iran negotiations proving premature later on,” Saul Kavonic, head of energy research at MST Financial in Sydney, Australia, told Al Jazeera.
June Goh, a senior oil market analyst at Sparta in Singapore, said it was unclear how Trump’s plan would help restore energy flows through the strait.
“Global observable oil inventories are starting to fall sharply, which should weigh on market sentiment more than political statements for a reopening of the strait,” Goh told Al Jazeera.
“Normalising the flow through the Strait of Hormuz will take more than what Project Freedom is offering, whilst the yawning gap in oil supply will take months to resolve.”
Iran’s threats against shipping in the Gulf have reduced maritime traffic in the strait to a fraction of peacetime levels, crippling a sizeable portion of the world’s oil and natural gas supplies.
Goldman Sachs estimates that the closure of the waterway, which normally carries one-fifth of the world’s oil supplies, and attacks on energy infrastructure have reduced global daily production by 14.5 million barrels.
Brent is up nearly 50 percent since the start of the war, and has not dropped below $100 a barrel for nearly two weeks.
Analysts have warned that prices are likely to remain elevated for some time after any peace deal is reached between Washington and Tehran due to the backlog of unloaded energy supplies, damaged infrastructure, and the need to clear Iranian mines.
Only 20 vessels crossed the strait on Wednesday, the most recent day for which figures were available, according to ship tracking data monitored by maritime intelligence platform Windward.
The strait saw an average of 129 daily transits before the US and Israel launched their war on Iran in late February, according to the United Nations Trade and Development (UNCTAD) agency.
“The market still appears to assume the Strait of Hormuz will start to open up within several weeks one way or another,” said Kavonic of MST Financial.
“The market may be underestimating how long the Strait could remain largely closed, and the scope for military escalations,” Kavonic added.
“Oil prices remain below the 2022 peaks, despite the Ukraine war barely impacting supply, whereas today over 10 percent of global oil supply is shut in. This disconnect cannot remain for too long.”
