Oil prices extend gains as US-Iran war deadlock keeps supply off market

By Colleen Howe

BEIJING, April 30 (Reuters) – Oil prices extended gains on Thursday on concerns supply from the key Middle East producing region will remain bottled up for longer as talks to end the U.S.-Israeli war against Iran have deadlocked. 

Brent crude futures for June rose $1.91, or 1.62%, to $119.94 a barrel as of 0057 GMT after gaining 6.1% in the previous session. The June contract, which has increased for a ninth day, expires on Thursday and the more active July contract was at $111.38, up 94 cents, or 0.85%, after gaining 5.8% in the previous session. 

U.S. West Texas Intermediate futures for June were up 63 cents, or 0.59%, at $107.51 a barrel, after climbing 7% in the previous session, climbing in eight of nine sessions.

U.S. President Donald Trump spoke on Wednesday with oil companies about how to mitigate the impact of a possible months-long U.S. blockade of Iran’s ports, a White House official said on Wednesday, triggering concerns in the market of an extended disruption to oil supplies.

“Prospects for any near-term resolution to the Iran conflict or a reopening of the Strait of Hormuz remain dim,” IG market analyst Tony Sycamore said in a note.

The meeting with oil companies followed a deadlock in efforts to resolve the conflict that has killed thousands and caused what analysts say is the world’s biggest energy disruption ever.

Tehran has largely blocked all shipping apart from its own from the Gulf through the Strait of Hormuz, a chokepoint for global energy supplies from the Middle East, since the U.S. and Israel began air strikes on Iran on February 28. This month, the U.S. began blockading Iranian ships.

On the supply side, the OPEC+ grouping of OPEC countries and its allies is likely to agree a small increase of around 188,000 barrels per day in oil output quotas on Sunday, sources told Reuters.

The meeting comes just after the United Arab Emirates’ withdrawal from OPEC, effective May 1, which is expected to deal a blow to the oil producer group’s ability to control prices. Although the Gulf nation’s exit would allow it to raise production after exports restart, analysts say that is unlikely to affect market fundamentals this year, especially with the Hormuz closure and other production disruptions from the war.

“Gulf countries, including the UAE, will take months to return to pre-war production volumes,” Wood Mackenzie analysts said in a note.

(Reporting by Colleen Howe; Editing by Christian Schmollinger)