Oil jumps as Middle East supply concerns persist amid shipping attacks

[LONDON] Oil prices rose more than 5 per cent on Thursday (Oct 8) on persistent worries about supply from the Middle East 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 were up US$5, or 4.99 per cent, at US$105.20 a barrel by 1041 GMT for their highest since Sep 9. US West Texas Intermediate (WTI) crude gained US$4.47, or 5.06 per cent, to US$92.75, its highest since Oct 2.

IG Chief Market Analyst Chris Beauchamp said the pending US storm along with an Axios report that Washington was preparing to resume major combat operations against Iran were keeping prices above US$100 a barrel.

“The US is probably attempting to pile on the pressure in a bid to bring Iran to the table, but we can’t discount the possibility of a new round of strikes. Investors certainly don’t seem to be taking any chances.”

Reuters was unable to independently verify the Axios report.

Meanwhile, Syria was considering providing military assistance to key ally Saudi Arabia for its escalating conflict with the Iran-backed Houthis in Yemen, a US official and a Syrian military official briefed on the matter said. Options being considered include defensive aid or deployment of forces in an offensive capacity to help Saudi-backed Yemeni troops, the sources said.

Supply disruptions persist

Prices settled lower on Wednesday after the International Energy Agency agreed to accelerate the release of oil stocks and to prioritise diesel supplies as governments seek to tackle record fuel prices and supply disruptions caused by the Iran war.

However, threats to oil shipping in the Gulf and the Strait of Hormuz, which carried shipments equal to about 20 per cent of global oil and fuel before the war, have increased in October as the Iran conflict enters its eighth month, boosting prices.

Attacks on tankers sailing through the strait last week hit their highest level since the war began, as Gulf producers increased exports.

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“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.

“Constrained product flows, extreme logistics costs and high likelihood of Iranian escalation are keeping prices elevated.”

Oil 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 per cent of current oil production and 16.37 per cent of current natural gas production as of Wednesday because of the storm, according to the Marine Minerals Administration.

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. REUTERS