Crude oil prices rose sharply Thursday, as Iran ramped up its attacks on tankers transiting the Strait of Hormuz and Hurricane Isaias threatened U.S. offshore production in the Gulf of Mexico.
Brent crude futures, the international benchmark, gained 4% to close at $104.28 a barrel. U.S. West Texas Intermediate futures advanced 3.6% to settle at $91.49 per barrel.
Nine tankers have come under attack in and around Hormuz over the past week, jeopardizing the recent recovery in crude oil flows through the strait. Oil prices backed off session highs after President Donald Trump said the U.S. would not attack Iran before the November midterm elections. NBC News, citing unnamed sources, reported earlier that Trump and his national security team were considering renewing strikes in the coming weeks.
Some 9.5 million barrels per day exited Hormuz during the week ended Tuesday, about 30% below normal levels before the Iran war, according to Kpler data. Crude flows from the Middle East, including pipeline workarounds, stood at 16.4 million bpd which is nearly equivalent to prewar levels.
In the Gulf of Mexico, oil companies have shut in about 500,000 bpd, or 25% of offshore production in the region, as Hurricane Isaias churns toward the coasts of Alabama, Mississippi and the Florida panhandle.
Tensions are sharply escalating in the Middle East. Iran-backed Houthi militants in Yemen fired missiles at airports in Saudi Arabia’s capital Riyadh and the city of Abha on Tuesday and Wednesday. Three people died and 36 were injured, according to the state-owned media outlet Al Arabiya. The Saudis intercepted another volley of ballistic missiles fired Thursday at Riyadh and Khamis Mushait, a spokesperson for the kingdom’s military said.
“While flows from the region have largely normalized, the need for US navy escorts, increased costs and logistical frictions and constant risk of being attacked call into question the longer-term feasibility of the flows,” said Ryan McKay, director of commodity strategy at TD Securities. “This ultimately warrants a sticky risk premium to remain in pricing,” McKay told clients in a Thursday note.
