Oil prices rose on Thursday on persistent worries about supply from the key Middle East producing region amid an increase in attacks on shipping in the Gulf and the Strait of Hormuz, while the US cut output as a hurricane menaced offshore production.
Brent crude futures rose $2.28 (R38.06) or 2.28%, to $102.28 a barrel by 06:27, causing a threat to fuel prices which have been skyrocketing due to the Middle East conflict. US West Texas Intermediate (WTI) crude futures gained $1.66, or 1.88%, to $89.94.
Prices settled lower on Wednesday after the International Energy Agency agreed to accelerate the release of oil stocks and to prioritise diesel supplies under a plan launched in March, as governments seek to tackle record fuel prices and supply disruptions caused by the Iran war.
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However, threats to oil shipping in the Gulf and the Strait of Hormuz, which carried shipments equal to about 20% of global oil and fuel before the war, have increased in October as the US-Israeli conflict with Iran enters its eighth month.
Attacks on tankers sailing through the Strait of Hormuz hit their highest last week of any week since the Iran war began as Gulf producers increased exports. The expansion of attacks is occurring as more crude is flowing out of the Gulf but at higher costs and risk to cargoes and crew.
In the latest attack, a tanker north of Qatar was struck by multiple projectiles, causing casualties, the United Kingdom Maritime Trade Operations agency said on Wednesday.
“The frequency of Iranian attacks on ships is now at the highest point since the war began, and likely to intensify further,” said Saul Kavonic, MST Marquee head of energy.
He noted that “constrained product flows, extreme logistics costs and high likelihood of Iranian escalation are keeping prices elevated”.
ANZ analyst Daniel Hynes said in a note on Thursday the IEA’s oil release would likely consist of barrels that were already part of the group’s original 400-million-barrel release plan at the start of the Middle East conflict, meaning it does not appear to represent an additional draw on strategic inventories.
“Ultimately, strategic stock releases can augment supply flows temporarily but do not create new production capacity,” Hynes said.
Hurricane concerns
Prices are also gaining on supply curtailments as a hurricane moves toward offshore production areas in the US, the world’s biggest oil producer, causing companies to shut their platforms.
Shell and Chevron said on Wednesday they were curtailing offshore operations in the Gulf as Hurricane Isaias approached.
Overall, US Gulf of Mexico oil and gas producers had shut in about 25.08% of current oil production and 16.37% of current natural gas production as of Wednesday because of the storm, according to the Marine Minerals Administration.
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Inventory data from the US, also the world’s biggest oil consumer, were supportive for prices as crude stockpiles fell by a higher-than-expected amount, while diesel inventories declined slightly.
Crude inventories fell by 3.2 million barrels to 424.1 million barrels in the week ended October 2, the Energy Information Administration said on Wednesday, compared with analysts’ expectations in a Reuters poll for a 1.7 million-barrel decline.
Distillate fuel inventories, including diesel fuel and jet fuel, dropped by 42,000 barrels to 105.14 million barrels, well below their levels reported for this time of year in the past five years.
- Brent crude futures rose $2.28, or 2.28%, to $102.28 a barrel, and US West Texas Intermediate crude futures gained $1.66, or 1.88%, to $89.94 on Thursday.
- Attacks on tankers in the Strait of Hormuz reached their highest weekly level since the Iran war began, impacting oil shipments equal to about 20% of global supply.
- The US Gulf of Mexico shut in about 25.08% of current oil production and 16.37% of natural gas production due to Hurricane Isaias, with Shell and Chevron curtailing offshore operations.
- US crude stockpiles fell by 3.2 million barrels to 424.1 million barrels in the week ended October 2, exceeding analysts’ expectations of a 1.7 million-barrel decline.
- Diesel inventories declined by 42,000 barrels to 105.14 million barrels, lower than levels reported at this time in the past five years.
