Key Takeaways
- Brent crude settled down 0.13 percent at $105.92 a barrel.
- US West Texas Intermediate crude futures rose 3.03 percent to $97.97 a barrel.
- Escalating conflicts in the Middle East are supporting oil prices with attacks on ships near the Strait of Hormuz.
Brent crude prices remained steady on Thursday, settling down 0.13 percent at $105.92 a barrel, as investors weighed possible US steps to ease restrictions on the world’s ‘shadow fleet’ of tankers. The market also saw support from ongoing geopolitical tensions in the Middle East, which kept a geopolitical risk premium in place.
US West Texas Intermediate crude futures, however, saw a significant increase, rising 3.03 percent to $97.97 a barrel, buoyed by a large US crude stock draw. The Department of Energy stated that any move to relieve sanctions on the shadow fleet would not help Russia move oil or oil products.
The shadow fleet discussions are part of a broader US strategy to address global oil supply concerns. Days after President Donald Trump temporarily lifted sanctions on Russian diesel fuel to ease a surge in global prices, new talks are centering on potentially allowing ‘legal oil’ to flow on previously sanctioned vessels, according to a US official.
Despite the potential easing of sanctions, the Department of Energy emphasized that such a move would not aid Russia in moving its oil or oil products. The Treasury Department referred questions to the Department of Energy, indicating a cautious approach to the issue.
Meanwhile, the Energy Information Administration reported that US crude inventories fell by 8.6 million barrels to 415.6 million barrels in the week ended October 9, significantly higher than the expected 288,000-barrel draw. Distillate inventories also declined, while gasoline inventories rose.
Escalating conflicts between Saudi Arabia and Yemen’s Houthis, along with renewed attacks on ships in the region, have sustained the geopolitical risk premium in oil markets. A container ship and a dry bulk carrier both sank near the Strait of Hormuz after being hit by projectiles in separate incidents, according to maritime officials.
The International Energy Agency (IEA) agreed to release over 20 million barrels of diesel to the market as soon as possible, in an effort to boost supply and cool soaring prices. Spain will release 4.4 million barrels from strategic reserves in October, according to an Energy Ministry official.
Ukraine resumed its attacks on Russian refineries with a strike on a plant in the Ryazan region, following Ukrainian President Volodymyr Zelenskiy’s anger at a ‘dangerous’ withdrawal of US intelligence. The ongoing conflict between Saudi Arabia and the Houthis is keeping a geopolitical premium in oil markets, but energy infrastructure has not been attacked in the last several days, according to MUFG analysts.
The IEA’s decision to release emergency reserves is part of a broader strategy to address the current oil market volatility. However, the potential easing of sanctions on the shadow fleet remains a key factor in the ongoing discussions.
