Crude Oil Soars Near 5%

Crude oil topped $92.6 a barrel on Thursday, the highest in nearly a month, as signs emerged that a revival in shipping through the Strait of Hormuz may be short-lived. A tanker was hit by multiple projectiles north of Qatar on Wednesday, causing casualties, while last week tanker attacks in the Strait reached their highest weekly level since the war began, according to maritime security sources. Meanwhile, it was reported that the White House had asked the Pentagon to prepare strike options against Iran that could be executed before the midterm elections, while US President Donald Trump said he no longer wanted a deal with Iran. Adding to upward pressure, supply disruptions emerged in the Gulf of Mexico, where Chevron and Shell have begun curbing production and evacuating offshore personnel as Tropical Storm Isaias approaches. As of Wednesday, around 25.1% of US Gulf oil production and 16.4% of natural gas output had been shut.

Crude oil prices climbed above $91 per barrel on Thursday, reversing losses from the previous session following reports that the Trump administration had instructed the Pentagon to develop strike options against Iran that could be carried out before the midterm elections. The development goes against the widely held expectation that President Donald Trump would refrain from escalating tensions with Tehran ahead of the November polls. Meanwhile, oil producers in the Gulf of Mexico shut in more than 510,000 barrels per day of crude output, equivalent to around a quarter of the region’s production, due to Tropical Storm Isaias. In the Middle East, oil exports have been gradually returning to prewar levels in recent weeks, although attacks on tankers in the Strait of Hormuz continued to threaten supply. Iranian-backed Houthis also attacked targets in Saudi Arabia, leading to a fresh wave of strikes by the Riyadh-led coalition against positions in Yemen.

Crude oil eased below the $89-per-barrel mark on Wednesday, marking its lowest level in over a month and extending a 16% slide from September's four-month peak on signs of easing Middle Eastern supply risks. Saudi Arabia cut official selling prices for its flagship crude grade to $5 below the regional benchmark as tankers were able to depart the Persian Gulf with full cargoes. Evidence of a pickup in export volumes from regional OPEC+ producers coincided with reports that US and Iranian officials were holding talks with regional authorities this week. Further easing supply concerns, Saudi Arabia said its East-West pipeline was operating at full capacity, diverting up to 5.8 million bpd of crude to the Red Sea. Still, shipping costs remained elevated following reported strikes against vessels in the Strait of Hormuz. Stateside, EIA data showed crude stockpiles fell by over 3 million barrels last week, while the Strategic Petroleum Reserve remained pinned near multi-decade lows.