Brent crude rose 3.8% to $87.26 a barrel on Wednesday morning after the US military said it knocked down an Iranian missile barrage and hit militia sites in Iraq. Tanker traffic through the strait of Hormuz remains essentially halted, and ING sees the risk of longer supply disruptions growing as Saudi oil infrastructure is targeted.
Brent crude, the international benchmark for oil prices, climbed 3.8% to $87.26 a barrel on Wednesday morning. Oil is rising again after the US military said it knocked down an Iranian missile barrage and worked with Saudi Arabian forces to strike sites in Iraq that Tehran-backed militias have used to launch attacks in recent days.
Iran had fired multiple ballistic missiles at US forces in the Middle East, ending a brief pause in the fighting, in what Washington cast as an attempted surprise attack by Tehran. Axios reported that the target was a US base in Jordan.
Hormuz traffic stays halted as a Saudi refinery reportedly shuts
Analysts at ING said the attempted attack by Iran on US forces threw "cold water on the idea of a swift de-escalation in the Persian Gulf". They warned that the risk of more prolonged supply disruptions grows as Saudi oil infrastructure is increasingly targeted.
Warren Patterson and Ewa Manthey, who wrote the note, pointed to reports that the 400k b/d Jazan refinery in Saudi Arabia has shut following Houthi attacks over the weekend. If confirmed, they said, that would add to tightness concerns in a refined products market already dealing with disruptions from the Persian Gulf and Russia.
Meanwhile, tanker traffic through the strait of Hormuz remains essentially halted. Iran and Oman have held talks on managing vessel transits, but Iran rejected Oman's proposal for a 50-50 shipping plan and instead wants oversight of both inbound and outbound vessels.
European gas storage sits below its seasonal average
The same note called the European natural gas market increasingly vulnerable as winter approaches. QatarEnergy has reportedly extended its force majeure for buyers in Asia and Europe to as far as the end of September.
EU LNG imports are on track to fall a little more than 25% YoY in July, which is making storage refills harder. Storage stands at 56% full, below the 10-year seasonal average of 72%, and ING said that suggests gas prices will remain elevated through the winter, with the risk of spikes higher.
Fed decision arrives with a 32% hike priced
Higher oil prices and the continued sell-off in chip stocks leave a volatile backdrop ahead of the Federal Reserve's rates decision later today, Deutsche Bank's Jim Reid wrote. Markets priced a 32% chance of a rate hike as of last night, the most uncertain the market has been on whether the Fed will move going into a meeting since December 2018.
Deutsche Bank's US economists expect the Fed to leave rates unchanged but see the risks of a hike as significant, with the renewed escalation in the Middle East complicating the inflation outlook. If rates hold, they expect at least a couple of dissents in favour of a hike.
Source: The Guardian
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