Oil Market Tightens as Tanker Attacks and Inventory Draws Mount
Brent crude is once again over $106, Iran is intensifying attacks on tankers in Hormuz, and global inventories are draining, while OPEC just forecast stronger demand for next year. Six months ago, one well-timed TruthSocial post by President Trump would have calmed traders down. Now, this no longer works as fundamentals trump talk.
Earlier in the war between the United States and Israel, and Iran, U.S. top officials could push prices lower with a statement about peace talks. There was even a brief ceasefire in June that pressured prices for weeks, as exports of crude from the Middle East picked up, driving hopes of a swift end to the hostilities. Then the ceasefire ended and the mutual strikes restarted.
That should have been enough to convince optimists that ending the war would require more than social media posts, but it did not, mostly because Gulf states rushed to find workarounds for their oil—and find them they did, switching to pipelines and ship-to-ship transfers. That was when the Yemeni Houthis joined the fray, attacking Saudi energy infrastructure.
Even with that escalation and widening of the hostilities, optimism remained dominant on the oil market, on the assumption that things simply would not be allowed to come to a disaster because no one has any interest in that disaster, namely a deep global energy crisis that would plunge economies into recession. In hindsight, this was the wrong assumption.
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Despite reports about Saudi Arabia, the UAE, and other Gulf producers not only restoring their oil flows to pre-war levels but in some cases even exceeding them, prices have climbed higher relentlessly, and now every dip is from a higher point and more modest than they were three months ago. The war has put a solid floor under oil benchmarks, and that floor is moving higher, too. All this is because the physical realities of the crisis are now making themselves known—and they are impossible to talk away.
For starters, there are doubts about the return to pre-war flows. Most tanker-tracking outlets, such as Kpler, Vortexa, and TankerTrackers have all reported tanker movement numbers close to pre-war rates, mostly thanks to ship-to-ship transfers off the coast of Oman. Some, such as Windward, report much lower numbers, with the latest update, for October 12, seeing only two tankers crossing the Strait of Hormuz, both in dark mode to avoid detection.
Meanwhile, the ship-to-ship transfers have squeezed tanker supply, and the huge risk that shippers are taking to move oil out of the Persian Gulf has pushed freight rates to all-time highs, with these rates now accounting for close to a third of the cargo’s price, up from less than 5% before the war began.
Source: https://finance.yahoo.com/energy/articles/oil-market-tightens-tanker-attacks-230000051.html