Oil Ends Lower but Holds Weekly Gains
Oil dipped, though remains higher for the week, as traders balanced profit-taking with concerns about disruptions to Middle East flows.
Global benchmark Brent settled above $84 a barrel while US benchmark West Texas Intermediate settled under $79 a barrel. Both are up about 11% this week.
The US launched its fifth straight day of attacks on Iran on Thursday, following up on the prior night's attacks that hit an oil tanker near Iran's main export terminal. Reuters, meanwhile, reported that Tehran had told Yemen's Houthi rebel group to close the Bab el-Mandeb gateway to the Red Sea shipping route if Iranian power infrastructure is attacked.
Tehran has repeatedly threatened to close the Red Sea gateway - a vital lifeline for Saudi Arabia's oil exports - during the conflict. But so far the Houthis, an integral part of Iran's proxy network, have refrained from doing so. Iran responded to earlier strikes by firing at American bases in Kuwait and Jordan.
"Absent a meaningful escalation, traders are reluctant to push prices materially higher," said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. "The physical market isn't yet signaling a critical supply shortage."
While visible transits through Hormuz have slid, some voyages appear to be continuing, with a handful of tankers conducting ship-to-ship transfers off the coast of Oman. The US assisted 10 vessels through Hormuz over the past 48 hours, according to the Joint Maritime Information Center.
Meanwhile, Iraqi oil loadings continued after a tanker earlier came under attack while loading there. Bloomberg reported earlier that the country had suspended oil-loading at Basrah after a tanker was struck by a drone, citing a person with knowledge of the matter.
Adding something of a ceiling to prices, questions also remain about the extent to which China, which slashed crude oil imports this year, will return to the market amid renewed fighting in Hormuz, said Joe DeLaura, global energy strategist at Rabobank.
Still, crude has soared to its highest in about a month as the escalation in the conflict revives concerns over flows from the energy-rich region, erasing part of a roughly 30% slump in the second quarter.
And the price spikes have been more severe in the market for fuels like gasoline and diesel amid near-daily Ukrainian strikes on Russian refineries and tankers.
As a result, Russia has temporarily halted diesel exports, tightening the global market for the fuel. In the US, diesel futures hovered around $4 a gallon, the highest since late May. And in Europe, the margin refiners receive for producing diesel from crude oil has never been higher.
Hiccups to refiner activity around the world, including in Germany and Nigeria, threaten to exacerbate tight supplies further.
As of Thursday, Tehran appeared in no mood to back down in the face of US President Donald Trump's warning that he'll escalate strikes - with the US president citing Iranian power plants and bridges as potential targets - until the Islamic Republic reopens Hormuz.
Oil Prices
- WTI for August delivery fell 0.8% to settle at $78.95 a barrel.
- Brent for September settlement dropped 0.9% to settle at $84.23 a barrel.
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