Crude Closes Mixed on War Signals

US crude oil ended the day slightly higher as traders parsed conflicting messaging on the trajectory of the Mideast conflict ahead of US President Donald Trump’s deadline for Iran to reopen the Strait of Hormuz or face destruction.

West Texas Intermediate settled near $113 a barrel. Given current supply constraints, the market is putting a premium on barrels for near-term delivery. May WTI closed the day higher. But Brent, the global benchmark for futures, is trading on the June contract, and prices ended Tuesday a bit lower near $109.

In another sign of how scarce spot supplies are, Dated Brent soared to a record high above $144 a barrel. The key price, based on a more immediate delivery period, measures the cost of shipments bought and sold in the North Sea.

Price swings in the futures market have been exaggerated by thin liquidity amid headlines signaling conflicting narratives. Many traders have curbed activity because of the extreme volatility and as they await the next moves by the Trump administration.

Trump stepped up his threats, pressing Iran to make an agreement before his Tuesday 8 p.m. deadline, saying that a "whole civilization will die tonight" if that does not occur. The New York Times reported that Iran has stopped negotiations with the US, citing three senior Iranian officials. But meanwhile, Axios reported progress has been made in the past 24 hours in talks between the countries.

"There's quite a lot of static and noise, and it's really hard to cut through all of it to understand where the signals are," said Mona Yacoubian, director of the Middle East Program at the Center for Strategic and International Studies.

Iran has warned that it would respond to escalated US strikes by ramping up its own attacks on energy infrastructure in the Persian Gulf - a move that could heighten the global fuel squeeze and amplify damage to the world economy. The war - now in its sixth week - has roiled crude markets, triggering a severe supply shock.

Early Tuesday, the US attacked military targets across Iran’s Kharg Island, a key oil export hub, helping to support prices. Crude also climbed as Israel Defense Forces confirmed it struck eight bridge segments "used by the Iranian regime."

"There's been no shortage of rhetoric," said John Kilduff, a partner at Again Capital. "None of these folks hold back when it comes to throwing verbal gasoline on the fire."

Oil markets have been hugely volatile since the war began, which is limiting how long traders can hold positions for and curbing position sizes as they run into risk limits. A gauge of Brent volatility had its highest monthly average in data since 2015 last month, and daily price swings have on average been more than $9 since the war began, the biggest in years.

"Either we get a fragile détente - no ground war, controlled escalation, gradual supply recovery - or a protracted conflict with boots on the ground and structurally higher risk premia as countries respond with extreme stockpiling," Societe Generale SA analysts including Mike Haigh and Ben Hoff wrote in a note.

As the war grinds on, there are further signs of deepening concern about near-term supply.

WTI’s prompt spread - the difference between its two nearest contracts - at one point traded near $16.50 a barrel on Tuesday, near the biggest premium on record as overseas buyers rush to purchase American crude.

The Energy Information Administration estimates that 9 million barrels a day of oil production from key Middle Eastern countries are expected to be shut in during April. Global oil demand growth is already projected to decline this year, driven mainly by reduced consumption in Asia, in a sign that demand destruction may be emerging earlier than expected.

Oil Prices

1. WTI for May delivery advanced 0.5% higher to settle at $112.95 a barrel in New York.
2. Brent for June settlement decreased 0.5% to settle at $109.27 a barrel.