Brent oil prices hit $110 a barrel for the first time since May as attacks on merchant ships in the Strait of Hormuz intensified and the market weighed on the risk of a new supply cut from the Persian Gulf.
Brent futures closed at $109.86 a barrel on Oct. 16. That's up $3.94, or 3.7%, and the highest close since May 19. U.S. light crude WTI rose $3.44, or 3.5%, to $101.41 a barrel. Brent gained 4.9% for the week, while WTI – 10.4%
According to Reuters, the rise in prices is related to concerns that the escalation around the Strait of Hormuz could tighten global supplies. Additional pressure on the market is exerted by uncertainty over Russian diesel and the disruption of work at a key installation at the Ryazan refinery after a drone attack.
Attacks on ships are increasing
Iran said it was stepping up its actions against shipping in response to the US blockade of its ports and new sanctions. Two Iranian officials told Reuters that Tehran was using new tactics to track and attack ships that Iran says are violating the country's restrictions.
On October 14, a container ship and a tanker were hit by unknown projectiles in the strait. The Singaporean container ship GFS Pride sank after the attack, but all 21 crew members were evacuated. According to the International Maritime Organization and the American newspaper “Washington Post“ the dry cargo ship Cape Dao also sank after being damaged in an earlier attack.
Data from the British Maritime Operations Service and industry sources, cited by the Anadolu Agency, show that more than 18 merchant ships were attacked or intercepted in the first 12 days of October. On October 12, six incidents were recorded - the highest daily number since the war began.
Oil flows through the Strait are decreasing
Oil traffic through the Strait of Hormuz is also shrinking. According to Kpler data, about 12.6 million barrels of crude oil per day were passing through the waterway on October 13, down from about 15 million barrels at the end of September. Before the war, the average volume was about 17 million barrels per day.
The strait between Iran and Oman is a key route for oil exports from the Persian Gulf states. Any ship delays increase the cost of transportation, insurance and cargo rerouting, and the market adds an additional risk premium to the price of the raw material.
“Attacks on ships passing through the Strait of Hormuz and military strikes between Saudi Arabia and the Houthis are supporting prices as the market remains worried about lower exports from the region“, said UBS analyst Giovanni Staunovo, quoted by Reuters.For now, supplies are not completely disrupted, but new attacks or the sinking of tankers could restrict movement even more. It is the development of shipping in the strait and signals of a possible expansion of the conflict that will determine the direction of prices in the coming trading sessions.
Sources: in.marketscreener.com, live.euronext.com, apnews.com