Oil declined after President Donald Trump said that the US would not attack Iran ahead of November’s midterm elections. Brent fell below $104 a barrel after surging 4.1% on Thursday, while West Texas Intermediate was near $91. In a social-media post, the US leader cited “productive discussions” with the Islamic Republic, while adding that crude was flowing through the Strait of Hormuz in record volumes.
Trump’s decision to lay off on new strikes comes despite Tehran escalating attacks in the waterway, which has increased risks for vessels that have been moving crude to global market in increasing volumes. The president also said that a US naval blockade of Iran’s ports would remain in full effect. After Trump’s remarks, the New York Times reported the US had drawn up plans for three days of strikes.
The Pentagon had plans to hit drone and missile arsenals, energy facilities and other sites, the newspaper said. Crude has had a volatile start to October as the US-Iran war drags on, with futures buffeted by rising flows from the Middle East, the pick-up in vessel attacks, and tightness in product markets. The fall-out from soaring freight rates, and renewed fighting between Saudi Arabia and the Tehran-backed Houthis in Yemen, have added further cross-currents to the market.
Iran’s semi-official Fars news agency reported several “heavy explosions” occurred in Hormuz late on Thursday when oil tankers attempting to navigate the southern route of the waterway were struck by mines, citing unidentified military sources. There was no independent confirmation of the report. A historic freight rally caused by the fallout from the war is adding huge costs to the petroleum supply chain.
Moving crude from the Persian Gulf to East Asia now costs more than six times as much as it did before the conflict. Beyond the Middle East, traders were also tracking Hurricane Isaias, which is gathering strength and expected to make landfall along the US Gulf Coast late Friday or early Saturday, with Alabama, Mississippi and the Florida Panhandle at risk. Producers in the US Gulf of Mexico have shut in about 1.3 million barrels a day of crude supply, more than 60% of output in the region.
While the hurricane is tracking well east of the biggest cluster of Gulf Coast refineries, three fuel-making facilities sit in or are adjacent to the projected path. They include Chevron Corp.’s 356,000 barrel-a-day refinery in Pascagoula, Mississippi.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing