Oil prices see-saw after hitting four-day highs

• Prices fluctuate with war disruption
• Historic supply disruption
• Estimated 8m bpd fall in March

Oil prices fluctuated on Friday, hitting four-day highs in early trade before retreating, as the International Energy Agency (IEA) warned that the Iran war is creating the “largest supply disruption” in the history of oil trading.

The IEA’s comments have largely overshadowed efforts by its sovereign members to ease supply constraints through the release of 400 million barrels of oil from these countries’ reserves, a measure agreed on Wednesday in what will be the largest ever drawdown.

“Market volatility will remain on the higher side, with oil direction largely gauged by news flows,” said Vijay Valecha, chief investment officer at Dubai’s Century Financial brokerage.

Brent crude was down 0.1 percent at $100 a barrel as of 10:48 GMT Friday, having hit a four-day peak of nearly $103 three hours earlier. US West Texas Intermediate was down 2.2 percent at $94, slipping from a session-high of $98.

Both crude benchmarks are still up by about $30 since the US and Israel launched strikes on Iranian civil and military infrastructure on February 28.

In response, Iran has effectively closed the Strait of Hormuz, a narrow channel marking the entrance to the Arabian Gulf through which about 20 million barrels per day (bpd) of oil and associated products would usually transit.

The near-total shuttering of the strait has led Gulf countries to cut daily crude output by at least 10 million barrels per day (bpd), the IEA wrote in a report on Thursday.

This estimates global oil supply will fall by 8 million bpd this month overall, with non-Opec countries such as Russia and Kazakhstan expanding production to ease the impact of reduced Gulf output.

“With few ships currently able or willing to load cargoes at port, and domestic storage tanks filling up, producers in the region are reducing or shutting-in production,” the IEA wrote.

• Egypt offers Red Sea oil storage during Hormuz crisis
• Iran war GPS jamming exposes shipping and consumer risk
• Iran makes new threats to Hormuz in ongoing conflict

“The war in the Middle East is creating the largest supply disruption in the history of the global oil market.”

The release of oil supplies from IEA members’ reserves amounts to about 50 days’ worth of the current global daily supply drop, according to AGBI calculations.

“The co-ordinated emergency stock release provides a significant and welcome buffer, but in the absence of a swift resolution to the conflict, it remains a stop-gap measure,” the IEA report said.