Brent Rises on Lingering Supply Concerns

Brent crude prices wavered near $104 a barrel on Friday after US President Trump said Russian President Putin had agreed to release diesel supplies into the global market. The US Treasury Department said the Office of Foreign Assets Control was “immediately issuing a temporary general license” to allow Russian diesel supplies to reach global markets. The proposed volume would amount to about 22.5 million barrels. Meanwhile, the US-Iran conflict has strained shipping, with a large tanker fleet tied up in ship-to-ship transfers outside the Strait of Hormuz, pushing global freight rates to record highs and reducing vessel availability on other routes. Eleven tankers came under attack while transiting Hormuz during the week that ended October 4th. Trump said earlier this week that he would not strike Iran again before the November midterm elections, citing what he described as productive discussions with Tehran. On the week, brent rose about 1.5%.

Brent crude inched rose past $103 per barrel on Friday, the highest in two weeks as mounting supply risks counterbalanced temporary relief that the US would not escalate the conflict against Iran this month. Freight costs for tankers crossing the Persian Gulf soared to record highs, and traffic through the Strait of Hormuz declined as maritime agencies flagged a series of attacks on vessels in the area. Ongoing conflict across the Middle East continued to disrupt OPEC+ output, curtailing crude flows to major refining hubs. Adding to supply concerns, recent EIA data showed that the US Strategic Petroleum Reserve fell to a near-record low. Meanwhile, Hurricane Isaias forced operators in the Gulf of Mexico to shut in over 60% of the region's crude production capacity. These disruptions overshadowed the brief pullback triggered when US President Trump indicated that Iran would not face strikes before the midterm elections on November 3rd.

Brent prices fell to $103 a barrel on Friday, consolidating after a 4% gain in the previous session, amid easing concerns over Middle East supply disruptions. US President Trump said that Washington was engaged in “productive discussions” with Iran and would refrain from attacking the country ahead of the midterm elections. Meanwhile, reports indicated that Tehran’s foreign minister said Iran was reviewing the US response to its proposal to reopen the Strait of Hormuz within seven days. Adding to the downward pressure, China is set to resume refined fuel exports in October following a brief suspension during the Golden Week holiday. On the other hand, threats to shipping through the Gulf and the Strait of Hormuz persist and supply risks continued in the Gulf of Mexico, where Hurricane Isaias forced producers to shut in approximately 1.3 million bpd as of Thursday, according to the US Marine Minerals Administration. For the week, Brent prices rose 2%.