Oil Prices Rise as Hormuz Shipping Risks and US Storm Threaten Supply

Oil prices rose sharply on Thursday as concerns over supply disruptions in the Middle East intensified amid increased attacks on shipping in the Gulf and Strait of Hormuz. A hurricane approaching the US Gulf of Mexico also prompted producers to cut offshore output.

Brent crude futures climbed $2.28, or 2.28 percent, to $102.28 a barrel by 7:27 a.m. Saudi time. US West Texas Intermediate crude gained $1.66, or 1.88 percent, to $89.94.

The gains came a day after prices fell following an agreement by the International Energy Agency to accelerate the release of oil stocks and give priority to diesel supplies under a plan launched in March. Governments are seeking to ease fuel price pressures and supply disruptions linked to the conflict between Israel, the United States and Iran.

Shipping risks in the Gulf and Strait of Hormuz have increased in October. Before the war, the waterway carried oil and fuel shipments equivalent to about 20 percent of global consumption.

Attacks on tankers travelling through the Strait reached their highest weekly level since the start of the conflict last week, according to sources cited by Reuters. The attacks have increased as Gulf producers raise exports, creating additional risks and costs for cargoes and crews.

In the latest incident, a tanker north of Qatar was hit by multiple projectiles, resulting in casualties, the UK Maritime Trade Operations agency said on Wednesday.

Saul Kavonic, head of energy at MST Marquee, said the frequency of Iranian attacks on ships had reached its highest level since the war began and could rise further.

He said restricted fuel flows, higher logistics costs and the risk of further escalation were keeping oil prices elevated.

ANZ analyst Daniel Hynes said the IEA release would probably involve barrels already included in the group’s original 400 million-barrel release plan announced at the beginning of the conflict. He said the move therefore did not appear to represent an additional draw from strategic reserves.

Strategic stock releases can temporarily increase available supplies but cannot create new production capacity, Hynes said.

Oil prices also received support from disruptions in US production as Hurricane Isaias approached offshore facilities in the Gulf of Mexico. Shell and Chevron said they were reducing offshore operations because of the storm.

US Gulf producers had shut in about 25.08 percent of oil production and 16.37 percent of natural gas production as of Wednesday, according to the Marine Minerals Administration.

US inventory figures also supported prices. The Energy Information Administration said crude stockpiles fell by 3.2 million barrels to 424.1 million barrels in the week ended October 2, compared with analysts’ expectations for a 1.7 million-barrel decline.

Distillate inventories, including diesel and jet fuel, fell by 42,000 barrels to 105.14 million barrels, remaining well below seasonal levels recorded over the previous five years.