Oil advances as stepped-up vessel attacks intensify Hormuz risks

Oil gained as traders weighed increased flows through the Strait of Hormuz against a pickup in Iranian attacks against vessels.

Brent rose toward $102 a barrel after a volatile session on Tuesday, while West Texas Intermediate was above $90. While shipments through Hormuz have expanded in recent weeks, UK Maritime Trade Operations has reported at least nine attacks in the waterway so far this month. That’s already half of the number across Hormuz and the Persian Gulf combined in September.

Tehran was hitting some ships, but not enough to stop the flow of oil and gas, US Vice President JD Vance told Reuters in an interview. Meanwhile, Washington remained open to an agreement, and was in talks with Iranian President Masoud Pezeshkian and Foreign Minister Abbas Araghchi, Vance said.

Crude has rallied sharply this year as the US-Iran war disrupted flows from the Middle East, fanning inflation. Leading industry figures including Shell Plc Chief Executive Officer Wael Sawan have warned this week that the world is running out of stopgaps to manage the impact of the conflict, with global stockpiles being drawn down and product prices including diesel still elevated.

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“The market is starting to believe that barrels can keep getting through,” said Haris Khurshid, chief investment officer at Karobaar Capital LP. Still, depleted inventories and tight diesel supplies mean “the physical market has a lot less cushion than the headline export numbers suggest,” he said.

Middle East oil flows have recovered to about 80% of pre-conflict volumes, Shell’s Sawan told a forum, while Vitol Group Chief Executive Officer Russell Hardy said about 12 million barrels a day of crude exited the strait over the past seven to 10 days. The waterway links the Persian Gulf to global markets.

Separately, Saudi Arabia said it’s now pumping 5.8 million barrels a day through its cross-country pipeline to the Red Sea. The link had been shut last month following attacks by drones that were launched from Iraq.

Later Wednesday, the International Energy Agency is due to hold discussions on plans for an emergency release of up to 100 million barrels of diesel and crude pledged by the Group of Seven, people familiar with the matter said. The talks are expected to provide more clarity on how to proceed.

In the US, crude stockpiles contracted by 2.1 million barrels last week, according to an estimate from the industry-funded American Petroleum Institute seen by Bloomberg. The snapshot also showed a drop in gasoline holdings, while distillates rose. Official data are due later Wednesday.

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Prices:

Brent for December settlement gained 0.9% to $101.48 a barrel at 6:04 a.m. in London.
WTI for November delivery rose 0.7% to $90.09 a barrel.

President Donald Trump said he was weighing a suspension of the federal gas tax, as his administration looks for ways to ease costs ahead of November’s midterm elections. Earlier this week, the US leader relaxed rules on the usage of diesel, allowing truckers to burn fuel normally reserved for tractors.

Traders were also monitoring what may become the first Atlantic hurricane of the year. A tropical depression formed about 630 miles (1,014 kilometers) south of the Mississippi River’s mouth, the US National Hurricane Center said Tuesday. It is expected to become Tropical Storm Isaias by Wednesday and reach hurricane strength by Thursday, potentially hitting the US Gulf Coast.

While forecasts put the storm east of major offshore oil and natural gas production south of Louisiana and Texas, there could be disruptions depending on its path and size. Chevron Corp. said it was evacuating non-essential staff from Gulf of Mexico platforms, but no changes to output had been made.

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