Oil Surges Above $100 on Rising Supply Risks

Crude oil prices surged above $100 a barrel on Friday, rising more than 11% this week amid tightening supply and strong demand for fuel from the shipping industry. Producers are facing higher freight rates and risk premiums to transport cargoes through the Strait of Hormuz, keeping uncertainty over future regional supply elevated. Iranian strikes on tankers in the strait have sharply reduced oil flows. In the week to October 13th, average daily flows fell to 11.62 million barrels from a baseline of 17.15 million barrels. Security risks in the Persian Gulf have contributed significantly to the price rally. Meanwhile, Ukrainian drone attacks on Russian refineries have further constrained fuel supply. Adding to the pressure, US crude inventories fell by 8.56 million barrels in the week ended October 9th.

Crude oil prices held around $98 a barrel on Friday, more than 6% higher this week, as escalating Middle East tensions and supply disruptions outweighed plans to release emergency reserves. Concerns about restoring physical oil flows through the Persian Gulf intensified after US Central Command confirmed that the Singapore-flagged container ship GFS Pride sank while being towed to shore after an Iranian projectile struck it in the Strait of Hormuz. Nevertheless, more than 40 vessels transited the strategic waterway over the previous 24 hours, indicating that some traffic continues. Meanwhile, IEA members pledged to release the remaining 100 million barrels from an emergency intervention launched in March, following pressure from US officials. Separately, reports say Washington is considering easing sanctions on certain vessels carrying Iranian, Russian or Venezuelan oil.

Crude oil traded above $97 per barrel on Friday and was on track to gain more than 6% for the week amid mounting supply concerns in the Middle East. The US Central Command confirmed that a Singapore-flagged container ship that sank in the Strait of Hormuz earlier this week was hit by an Iranian projectile, adding uncertainty over the recovery of physical oil flows and pushing tanker rates to record highs. Rising tensions between Saudi Arabia and Iran-backed Houthi forces in Yemen further heightened supply risks. Meanwhile, the IEA agreed to proceed with the release of the remaining 100 million barrels of oil from a coordinated intervention launched in March, following lobbying efforts by US officials. Elsewhere, EIA data revealed that US crude inventories dropped by 8.6 million barrels last week, marking their largest decline since February. WTI was also poised to outperform Brent for the week, supported by lower shipping costs for US crude, which boosted demand for American barrels.