Crude oil prices were on course for a sizable weekly gain today, as the Strait of Hormuz remains almost entirely paralysed and the Yemeni Houthis target tankers in the Bab el-Mandeb Strait in the Red Sea. To make matters worse, Kazakhstan has suspended oil flows via the Caspian Pipeline Consortium system following Ukrainian drone attacks.
At the time of writing, Brent crude was trading at $100.30 per barrel, with West Texas Intermediate at $91.70 per barrel, both up by over $10 per barrel since Monday.
“Further escalation in the Persian Gulf and fears of a widening conflict are putting a significant amount of oil supply at risk,” ING commodity analysts said in a note today, pointing out the Houthis’ attacks on Saudi tankers in the Bab el-Mandeb Strait and President Trump’s fresh threats against Iran.
“With little-to-no sign of de-escalation, the market is likely to take the path of least resistance for now. This suggests oil prices will only continue to move higher. The key question is at what price level pressure begins to build on the Trump administration to return to the negotiating table,” Warren Patterson and Ewa Manthey also wrote.
According to AAA data, U.S. gasoline prices are once again above $4 per gallon, which may hasten the moment of that return, ahead of midterm elections in November, in which fuel price concerns are likely to feature high on voters’ priority list.
According to Eric Nutall of Ninepoint Partners, oil production in the Middle East is still 7 to 8 million barrels daily below pre-war levels, and “global onshore inventories [are] at near record low seasonal levels”. On top of that, the U.S. Strategic Petroleum Reserve is close to dangerously low levels, and OECD stocks are also down significantly. All this suggests that oil prices are going to keep moving higher unless signs emerge of willingness from either the U.S. or Iran, or both, they are ready to start discussing peace.
By Irina Slav for Oilprice.com
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