DTN Oil Update
Oil on Track for Weekly Jump as US-Iran Tensions Mount
VIENNA (DTN) -- Oil prices edged higher in early Friday morning trade and were on track for the second consecutive weekly increase on the back of rising tensions between the U.S. and Iran and slowing oil flows from the Middle East.
By 8:02 a.m. EDT, ICE Brent for October delivery rose $0.21 to $93.99 bbl, and NYMEX WTI for October delivery advanced $0.13 to $86.96 bbl.
Downstream, the increase was more pronounced, with NYMEX ULSD futures for September delivery rising $0.0399 to $4.5202 gallon, and front-month RBOB futures appreciating by $0.0628 to $3.3257 gallon.
The U.S. Dollar Index continued lower, down 0.218 points to a three-month low 98.595 against a basket of foreign currencies.
Crude benchmarks rose to the highest in more than three weeks on slimming prospects of an easing oil supply disruption after Tehran and Washington adopted a more confrontational stance following the expiry of the official 60-day ceasefire on Monday, Aug. 17. Iran stepped up attacks on commercial ships trying to traverse the Strait of Hormuz outside of Tehran-approved corridors, leading daily crossings of the energy chokepoint back into the single digits, compared to the ante bellum average of 130.
Iran-aligned Houthis also launched fresh attacks on Saudi energy infrastructure outside of the Persian Gulf this week, raising concerns over the substantial crude oil flows that Saudi Arbia had during the nearly six-month long crisis successfully diverted to ports outside of Iran's reach.
The latest escalation in the conflict came in the form of a midweek U.S. announcement to impose harsh economic sanctions on Iran. U.S. President Donald Trump on Wednesday in a social media post declared "economic warfare and isolation" against the country, and threatened countries continuing to trade with Iran with severe economic consequences. Tehran on Friday warned against such a step, saying that their response would be "crushing, punishing and devastating". U.S. Treasury Secretary Scott Bessent said that he would share details about the planned sanctions package on Monday, Aug. 24.
Intensifying Ukrainian attacks on Russian refineries, meanwhile, have over the past months also contributed to the global fuel supply tightness. Analysts estimate that the strikes have temporarily disabled anywhere from 20 to 40% of the country's refining capacity, sparking fuel shortages and export bans from an important global diesel supplier, and leading to a rally in diesel prices which dwarfed the rise in underlying crude oil futures.
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