Brent oil advanced to the highest since early June as traders weighed threats to maritime traffic that span from the Strait of Hormuz and the Red Sea to a key Kazakh export terminal on Russia’s coast.
The global benchmark rose 2% to settle around $91 a barrel as the US conducted a 10th straight day of strikes on Iran after President Donald Trump vowed Tehran “will pay” for killing American soldiers. In a sign of continued Iranian attempts to strike tankers crossing Hormuz, another ship carrying oil products was hit.
Meanwhile, Yemen’s Houthi militants threatened to blockade Saudi Arabia’s maritime traffic in the Red Sea, adding another level of risk to supplies from the top OPEC producer. The group emailed shipowners advising them not to call at ports in Saudi Arabia, while at least three tankers have already U-turned in the Southern Red Sea.
Brent prices will likely surpass $100 a barrel if tensions persist for another several weeks, said Scott Shelton, an energy specialist at TP ICAP Group Plc.
Goldman Sachs Group Inc. presented an even grimmer scenario if disruptions persist: Brent topping $120 a barrel by the fourth quarter, although that’s not the bank’s base case. At present, Goldman sees Brent at $80 in the final three months of the year, with the Houthi threat adding upside risks to the forecast.
Away from the Middle East, there have also been disruptions after a spate of attacks at the Caspian Pipeline Consortium terminal on Russia’s Black Sea coast, which ships most of Kazakhstan’s oil. The Central Asian nation has at times shipped close to 1.8 million barrels a day of crude, making it a significant global exporter.
Gasoline and diesel futures inched up, trading near their highest levels since late May. The lengthy run-up in prices in the last month likely spells further hikes at the pump and signals continued tightness in the market for refined products, with stockpiles abnormally low for mid-summer in the US.
Oil has repeatedly swung on the prospects for escalation and detente in the conflict, making for increasingly choppy price moves. The Houthi threat could open up a new front in the conflict, sending prices higher just weeks after oil markets looked to have averted the worst-case impacts of the Iran war.
Saudi exports from Yanbu hit record levels in the days and weeks before the Houthis threatened to block the kingdom’s shipments, according to vessel-tracking data compiled by Bloomberg. The Saudi Foreign Ministry said it would take all necessary measures to protect its ships in accordance with international law.
Visible traffic through Hormuz came to a near standstill on Monday following Iranian attacks on vessels over the weekend. An oil supertanker called the Acheloos and a smaller fuel tanker were both struck in the waterway, according to Dynacom Tankers Management Ltd., the ships’ manager.
Oil Prices
- Brent for September settlement was 2% higher to settle at $91.01 a barrel in New York.
- WTI for September rose 2.3% to settle at $84.34 a barrel.
- The August contract expires on Tuesday.