Oil drops after US issues license for countries to buy Russian oil stranded at sea for 30 days

Oil heads for weekly gains despite US sanctions waiver on Russian oil

Oil Market Trends and Geopolitical Influences

By Jeslyn Lerh and Sam Li

Weekly Performance of Oil Prices

SINGAPORE, March 13 (Reuters) - Oil prices headed for weekly gains as of Friday, despite the U.S. trying to ease supply concerns by issuing a 30-day license for countries to buy Russian oil and petroleum products stranded at sea.

Brent futures for May rose 10 cents, or 0.1%, to $100.56 a barrel by 0400 GMT, heading for about a 9% weekly increase. U.S. West Texas Intermediate (WTI) crude for April was down 16 cents, or 0.2% at $95.57 a barrel, though also poised for a 7% uptick for the week.

US Sanctions Waiver and Market Reactions

The license was issued in what Treasury Secretary Scott Bessent said was a step to stabilise global energy markets roiled by the U.S.-Israeli war on Iran, but analysts said this has failed to resolve wider supply constraints.

Analyst Perspectives on Supply Constraints

"ICE Brent futures have already breached $100 per barrel and are still supported today, despite moves to calm the markets with the Russian oil waiver and the unprecedented release of emergency stockpiles," said Emril Jamil, senior analyst at LSEG.

"The market sees this as a short-term solution that does not address the crux of the supply disruption. The crude intermonth spreads for future months indicate an unresolved and continued tightness in supply," Jamil said.

Regional Differences in Oil Support

Brent is more supported than WTI as Europe is more susceptible to energy security issues, while the U.S. is able to stave off its exposure due to its domestic output, Jamil said.

Strait of Hormuz and Fundamental Issues

Yang An, analyst at Haitong Futures, said: "Issuing the license has eased market concerns, but it won't resolve the most fundamental issue. The most important thing is the restoration of navigation in the Strait of Hormuz."

Strategic Petroleum Reserve Releases

The announcement on Russian oil came a day after the U.S. Energy Department said the U.S. would release 172 million barrels of oil from its Strategic Petroleum Reserve to help curb skyrocketing oil prices.

International Coordination

That plan was coordinated with the International Energy Agency, which has agreed to release a record 400 million barrels of oil from strategic stockpiles, including the U.S. contribution.

Market Response to IEA Release

Fleeting relief sparked by the IEA release, however, was shattered by a re-escalation of Middle East risks, IG analyst Tony Sycamore said in a note.

Both benchmark prices surged more than 9% on Thursday and hit their highest levels since August 2022.

Escalating Middle East Tensions

Iran's new supreme leader Mojtaba Khamenei said Iran would fight on and keep the Strait of Hormuz shut as leverage against the United States and Israel.

Attacks on Oil Infrastructure

Two fuel tankers in Iraqi waters were struck by explosive-laden Iranian boats, Iraqi security officials said on Thursday. An Iraqi official told state media that the country's oil ports have completely stopped operations.

US Response and Naval Escort Plans

Meanwhile, U.S. Treasury Secretary Scott Bessent told Sky News in an interview that the U.S. Navy, perhaps with an international coalition, would escort vessels through the Strait of Hormuz when it is militarily possible.

(Reporting by Jeslyn Lerh in Singapore, Sam Li and Lewis Jackson in Beijing; Editing by Tom Hogue)