Key Takeaways
- Oil prices reached six-week highs as Iran vowed retaliation against US attacks.
- Tensions escalated with US and Iranian strikes on oil tankers and warships.
- Global oil supply is under pressure, with US inventories of gasoline and distillate fuel below average.
Oil prices surged to six-week highs on Monday, with Brent crude futures rising 85 cents, or 0.9 percent, to USD97.13 a barrel by 12:38 p.m. EDT (1638 GMT).
The rise came as Iran vowed to strike energy infrastructure across the Middle East in response to further US attacks on its assets, marking a significant escalation in the conflict.
US West Texas Intermediate crude also saw a 1.3 percent increase, or USD1.15, to USD92.63 a barrel, with futures peaking at USD93.29, the highest since July 24.
The United States and Iran have resumed attacks on each other’s assets, with maritime intelligence firm Marisks noting that commercial tankers are now being used as instruments of economic pressure.
Brent crude rose around 8 percent last week, and WTI gained nearly 10 percent, following the resumption of attacks.
The conflict has taken a heavy toll on global oil supply, with nations burning through stockpiles to avoid deficits. In the United States, the largest oil producer and consumer, inventories of gasoline and distillate fuel are substantially below year-ago and five-year seasonal averages.
Regional tensions were further heightened by Israeli strikes on a town in southern Lebanon, which killed at least 12 people, marking one of the deadliest days of bombardment in recent weeks.
Elsewhere in the Middle East, Saudi Aramco’s Jazan oil refinery was also attacked on Monday, with damage being ascertained.
An average of 10 commodity ships transited the Strait of Hormuz per day over the past 10 days, the lowest since May, according to data from analytics firm Kpler.
If tanker traffic begins to slow materially, the market could price in a much larger supply shock, according to Priyanka Sachdeva, head of market insights at Phillip Nova.
Goldman Sachs warned that oil prices may rally as high as USD120 a barrel if attacks on shipping rise.
