Crude oil prices ticked higher earlier today, extending gains from Tuesday as traders continued to worry about the stability of flows out of the Middle East.
At the time of writing, Brent crude was trading at $110.30 per barrel, with West Texas Intermediate at $99.12 per barrel, both up by over 1% from Tuesday. The latest inventory report out of the U.S. contributed to the bullish sentiment with another sizable draw estimated for last week.
The rally also comes despite a Wall Street Journal report from Tuesday that said oil flows out of the Middle East had topped pre-war levels in the week to October 18, running at a daily average of 24 million barrels. The report cited data from Kpler, which Reuters had cited in a separate report as estimating Hormuz flows specifically at 8.5 million barrels daily, because of intensified Iranian attacks. For the WSJ report, the Hormuz flows were estimated at 14 million barrels daily.
“We believe this is a mix of profit taking and optimistic hopes of a Qatar- or Pakistan-brokered deal, countered by the realisation that any deal is still very distant and compounded further by inventory data from the American Petroleum Institute (API), which shows drawdowns continuing in the US for both crude and products,” DBS analyst Suvro Sarkar said, as quoted by Reuters earlier today.
Record-breaking freight rates for the Persian Gulf are compounding the price problem in oil. As ING commodity strategists wrote in a Tuesday note, the record rates come from “less efficient use of tankers due to developments in the Middle East”. This is most likely a reference to the surge in ship-to-ship transfers in the Gulf of Oman as a way of reducing the danger of drone or missile strikes on larger vessels in the Strait of Hormuz.
By Irina Slav for Oilprice.com
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