DTN Oil Update
Oil Soars to 5-Month Highs on Mounting Supply Risks
VIENNA (DTN) -- Oil futures rose to their highest since May Tuesday morning amid intensifying Iranian attacks on commercial ships in the Strait of Hormuz and lingering Houthi threats on Saudi infrastructure supporting a higher geopolitical risk premium. WTI's front-month contract on its last trading day jumped more than 5% earlier in the session.
By 7:55 a.m. EDT, ICE Brent for December delivery was up $2.18 to trade near $107.68 bbl. NYMEX WTI for November delivery soared $5.84 to $109.50 bbl, while the more actively traded December contract rose $2.07 to $100.61 bbl.
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Downstream, NYMEX ULSD for November delivery advanced $0.0768 to $4.9969 gallon, and front-month RBOB futures edged higher $0.0166 to $3.2080 gallon.
The U.S. Dollar Index slipped 0.09 points to 101.695 against a basket of foreign currencies.
Attacks on vessels in the region have so far in October been more frequent than at any other point during the conflict that started in late February. The United Kingdom Maritime Trade Operations Center has so far this month reported of 30 attacks in and surrounding the Strait of Hormuz. Commodity intelligence firm Kpler on Monday said they had counted 18 verifiable ship attacks over the last two weeks alone. Iranian forces, meanwhile, alleged that two oil tankers had struck mines on Sunday, although no independent reports have so far confirmed the reports circulating in Tehran-affiliated media.
Vessels crossing the waterway weren't the only ones subject to this new wave of Iranian attacks. Ships in the Gulf of Oman are also increasingly being targeted, threatening one of the few workarounds to the blockade of the strait. Saudi Arabia has over the past several months diverted as many crude oil loading operations as possible from terminals inside the Persian Gulf to offshore ship-to-ship transfers in the Gulf of Oman.
Houthi rebels have also ramped up attacks on Saudi Arabia since the start of the Yemeni Saudi-backed counteroffensive earlier this month. A spokesperson for the Tehran-allied militia on Monday claimed several new attacks on Saudi infrastructure, including the Shaybah oil field and the Red Sea port of Yanbu. Saudi forces have previously successfully intercepted drones launched at the Shaybah field near the border with the United Arab Emirates, and Riyadh has so far not commented on Monday's alleged strikes. In reaction to the growing Houthi threat, the kingdom on Monday officially postponed a planned in-person economic forum citing security concerns.
Elsewhere, market participants are awaiting weekly U.S. inventory reports to gauge the level of supply-demand imbalance now that crude oil releases from the country's Strategic Petroleum Reserve have trickled out. Commercial inventories posted a hefty decline of 8.6 million bpd amid hurricane-induced production shut-ins in the week ended Oct. 9. Despite offshore operations having largely been restored, analysts still expect inventories to have shrunk further during the last week. The American Petroleum Institute is set to release inventory estimates later Tuesday, followed by U.S. Energy Information Administration data scheduled for Wednesday, Oct. 21.
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