Brent crude is back above $106 as Iran steps up attacks on tankers near Hormuz and global inventories drain. Oilprice.com argues that physical supply now moves prices more than political statements do.
Brent crude is once again over $106, Iran is intensifying attacks on tankers in Hormuz, and global inventories are draining. OPEC also forecast stronger demand for next year.
Talk has lost its pull on traders. Earlier in the war, U.S. officials could push prices lower with a statement about peace talks, and a brief ceasefire in June pressured prices for weeks. Then the ceasefire ended and the mutual strikes restarted.
Tanker attacks push freight costs higher
Ship-to-ship transfers have squeezed tanker supply, and the risk shippers take moving oil out of the Persian Gulf has pushed freight rates to all-time highs. They now account for close to a third of the cargo's price, up from less than 5% before the war began.
Attacks on vessels in the strait have picked up in the past couple of weeks. Windward reported at least six tankers hit on October 11, while UKMTO counted nine attacks in and around the strait in the first seven days of October, half the number reported in the entire previous month.
Executives warn on thinning stockpiles
Meanwhile, energy executives have stepped up their warnings about the world's emergency oil cushion. Aramco's chief executive noted the loss of 3 billion barrels since the start of the war and the release of around 1 billion barrels, leaving global commercial stocks near the minimum operational level.
Chevron's chief executive described a market where the floor keeps rising. He said: "The underlying fundamentals are becoming tighter and tighter."
Russia diesel deal fails to cool fuel prices
Fuel markets look worse than crude, especially diesel. President Trump's announcement of a diesel deal with Russia failed to bring U.S. diesel prices below $6 per gallon, because the agreed 3 million tons, equal to about 15 million barrels, cover only a fraction of consumption for a very short while.
The oil market is now at the mercy of fundamentals.
Source: Oilprice.com
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