Brent topped $110 per barrel as traders grew more pessimistic about a resumption of normal oil flows out of the Persian Gulf. Kpler data point to intensive tanker attacks in the Strait of Hormuz, while ING analysts say the market is pricing in a significant risk premium.
Crude oil prices extended their climb, with Brent topping $110 per barrel again earlier in the day and WTI back at over $100. Traders are increasingly pessimistic about the resumption of normal oil flows out of the Persian Gulf.
At the time of writing, Brent traded at $109.68 per barrel, its highest in five months, with West Texas Intermediate at $98.55 per barrel.
Tanker attacks cut Persian Gulf flows
The price trend follows reports of intensive tanker attacks in the Strait of Hormuz, which have severely affected oil flows, according to Kpler. Earlier this month, the firm said oil exports had recovered to pre-war levels, but it now reports that Iranian strikes on tankers have again decimated export rates.
Reuters reported at least 18 tanker attacks over just the last two weeks, based on Kpler data. The daily average flow of oil out of the Persian Gulf had shrunk to 8.5 million barrels, from more than 20 million barrels daily two weeks ago, per a separate Reuters report.
ING sees a risk premium in prices
ING's commodity analysts wrote in a note that oil prices remain well-supported amid ongoing tensions in the Middle East despite relatively strong Persian Gulf flows. Warren Patterson and Ewa Manthey added that this suggests the market is pricing in a significant risk premium, given the situation's volatility.
They noted that the war premium would gradually vanish if oil flows remained stable and strong. According to ING's note: "Clearly, there are no signs of this yet".
Meanwhile, the Yemeni Houthis struck Saudi Arabia again, targeting energy infrastructure, airports, and military sites. The escalation in Houthi-Saudi fighting has contributed considerably to already heightened oil market volatility on Middle Eastern developments.
Source: Commodities Analysis & Opinion
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