Brent Crude Rebounds on US-Iran Tensions

Brent crude rose past $102 per barrel on Thursday, the highest in over three months and soaring nearly 15% since the start of September, as escalatory strikes between Iran and the US further supressed supply from the key region. Tehran signaled it will not back down from a military blockade as the US launched attacks against a series of Iranian tankers near Kharg Island, host to the state's key energy infrastructure. The deteriorating backdrop from the Middle East dims expectations that supply from the region could be normalized as Asian economies are forced to re-enter the energy market. China imported 8.93 bpd of crude oil in August, a 6.2% increase from July, after its reliance on inventory since the start of the conflict had shielded the global economy from a deeper energy shortage due to blockaded tankers in the Persian Gulf. Inventories were also lower in the US, with the government's SPR hovering at a record low.

Brent crude traded around $101 per barrel on Thursday, hovering at its highest level since May as the intensifying conflict between the US and Iran raised concerns over further disruptions to energy supplies from the Middle East. Iran said it was ready for a more intense conflict, vowing to resist the US naval blockade and warning that it would intensify its attacks if American forces continued strikes on Iranian territory. Meanwhile, President Donald Trump predicted that the conflict would not end until after the November midterm elections and said significant relief in gasoline prices was unlikely before then, signaling limited prospects for near-term de-escalation. Hostilities intensified over the past week following roughly a month of relative calm, with both sides stepping up attacks. The conflict broadened after Iran-backed Houthi militants attacked several energy facilities in Saudi Arabia, prompting a temporary suspension of some operations.

Brent crude rose above $101.5 a barrel on Wednesday for the first time since May, driven by escalating US-Iran tensions. US officials reported that Iran attempted to attack Navy ships on Monday after targeting an aircraft carrier with ballistic missiles over the weekend, in a previously undisclosed wave of attacks. Meanwhile, Iranian state media said a US missile targeted a small oil tanker four miles from Kharg Island on Tuesday. The war broadened this week after Iran-backed Houthi militants attacked several energy facilities in Saudi Arabia, forcing a temporary halt to some operations. The attacks came after the US military struck three Iranian oil tankers on Saturday in retaliation for Iranian ballistic missile attacks on two Navy warships. Adding to upwards pressures on prices, US crude inventories fell by 0.3 million barrels last week. Meanwhile, Ukrainian drones hit infrastructure in Novorossiysk, Russia’s key oil terminal in the Black Sea, on Wednesday.