Key Moments
- Brent crude and WTI futures were lower in Friday trading but remained on track for notable weekly gains
- Heightened U.S.-Iran hostilities and uncertainty around the Strait of Hormuz boosted risk premiums despite ongoing tanker flows
- Major banks and analysts lifted Brent price forecasts as Middle East conflict risk and refinery attacks drove fuel prices higher
Prices Ease Intraday but Weekly Gains Remain Intact
Oil futures slipped in Friday trade but stayed on course for a solid weekly rise as mounting tensions between the United States and Iran intensified worries about supply security in the Middle East.
By 0813 GMT, Brent crude futures were lower by 47 cents, or 0.49%, at $95.05 a barrel. U.S. West Texas Intermediate (WTI) crude futures fell 64 cents, or 0.70%, to $90.66.
Despite the pullback, Brent increased 6.5% for the week, marking its largest weekly advance since August 17. WTI climbed 8.8% over the same period, its strongest weekly performance since July 13.
Geopolitical Risks and Strait of Hormuz Concerns
U.S. strikes earlier in the week that killed and injured dozens of people, including Iranian civilians, represented the most intense confrontation between Washington and Tehran since July. The conflict has been in its seventh month after beginning with U.S.-Israeli strikes in late February.
Israeli Defence Minister Israel Katz reiterated that Israel would “cripple” Iran’s military and civilian infrastructure, including energy facilities.
A U.S. effort to pressure Iran’s economy by blocking its oil exports and curbing sanctions evasion is becoming increasingly difficult to bear, according to three senior Iranian sources.
“The combination of renewed U.S.-Iran hostilities and ongoing uncertainty around the Strait of Hormuz has been enough to reprice risk higher, even while actual tanker flows have not collapsed,” said Tim Waterer, chief market analyst at KCM Trade.
Preliminary shipping data showed that four commodity vessels passed through the Strait of Hormuz on Thursday, down from nine the previous day and well below the 10-day average of about 15 vessels.
Regional Supply Developments
In Iraq, crude exports rose in August to about 2.34 million barrels per day, compared with about 1.35 million barrels per day in July, two Iraqi energy officials said on Wednesday.
Analysts became more constructive on oil prices as anxiety around the Strait of Hormuz increased. The waterway is a critical chokepoint that handled about one-fifth of global oil and liquefied natural gas shipments before the conflict started in late February.
| Item | Level / Change | Details |
|---|---|---|
| Brent price (by 0813 GMT) | $95.05 | Down 47 cents or 0.49% |
| WTI price (by 0813 GMT) | $90.66 | Down 64 cents or 0.70% |
| Weekly move – Brent | 6.5% | Biggest weekly gain since August 17 |
| Weekly move – WTI | 8.8% | Strongest weekly performance since July 13 |
| Iraq exports – July | About 1.35 million bpd | Reported by Iraqi energy officials |
| Iraq exports – August | About 2.34 million bpd | Increase from July levels |
| Strait of Hormuz tanker transits (Thursday) | 4 vessels | Versus 9 a day earlier; below 10-day average of about 15 |
Revised Price Forecasts and Product Market Impact
Citi increased its average Brent crude price projection for the third quarter to $86 a barrel from $80, citing a longer-than-anticipated delay in the reopening of the Strait of Hormuz.
Analysts at ANZ also raised their short-term Brent forecast to $95 a barrel and noted upside risk if the conflict in the Middle East escalates further.
Separately, fears of supply disruptions stemming from renewed U.S.-Iran hostilities and Ukrainian attacks on Russian refineries lifted average U.S. diesel prices to record highs.
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