Oil prices rise on Thursday as attacks on shipping in the Gulf and the Strait of Hormuz kept supply worries alive, while a hurricane in the Gulf of Mexico forced U.S. producers to cut output.
Brent crude futures traded between about $101.50 and $102.30 a barrel, up roughly 1.3% to 2.3% at different points in the session. U.S. West Texas Intermediate gained about 1.3% to near $89.40.
Prices had settled lower Wednesday after the International Energy Agency agreed to speed up the release of emergency oil stocks and to put diesel supplies first, under a plan launched in March. Governments are trying to contain record fuel prices and the disruption caused by the war with Iran. The relief did not last.
Why oil prices rise as tanker attacks intensify
Threats to shipping have grown this month as the U.S. and Israeli conflict with Iran enters its eighth month. The strait carried about 20% of the world’s oil and fuel before the war, and last week brought the most tanker attacks in a single week since the fighting began. The UK Maritime Trade Operations agency said a tanker north of Qatar was struck by multiple projectiles, causing casualties.
Iran’s top negotiator said on Sunday that the strait will stay closed until Washington meets Tehran’s conditions, and no peace deal is in sight.
Why stock releases may not be enough
ANZ analyst Daniel Hynes said in a note that the release would likely consist of barrels already included in the original 400 million barrel plan announced at the start of the conflict, so it does not appear to add a fresh draw on emergency inventories. Stock releases can lift supply for a time, he said, but they “do not create new production capacity.” He also pointed to constrained product flows, extreme shipping costs and a high risk of Iranian escalation as reasons prices stay elevated.
A hurricane and falling U.S. stockpiles
A hurricane moving toward offshore production areas in the Gulf of Mexico led companies to shut platforms, trimming output from the world’s biggest oil producer. U.S. inventory data also gave prices a lift. Crude stockpiles fell by 3.2 million barrels to 424.1 million in the week ended Oct. 2, far more than the 1.7 million barrel drop analysts expected, while diesel inventories slipped slightly.
Diesel is the pinch point
Diesel is where the strain shows most. U.S. pump prices for diesel hit a record near $6.43 a gallon in September, according to GasBuddy, and the IEA’s decision to put diesel first reflects how tight that market has become. In Nigeria, the Dangote refinery cut its diesel price to N1,700 a liter on Wednesday, but a renewed climb in crude could limit further cuts.
What traders are watching
Brent remains far above year ago levels, and analysts at Mirae Asset expect volatility to persist, with prices likely to hover near $100. Traders are watching for further tanker attacks, the path of the storm and any sign that Washington and Tehran will talk. Earlier this week, prices dipped when the Group of Seven agreed to release 100 million barrels from reserves. That relief proved short.
In a market this jumpy, a single tanker strike can erase days of calm created by reserve releases. Until the strait reopens, that risk is likely to stay in every barrel’s price.
