Brent Tops $100 BBL on Mounting Tensions in U.S.-Iran War


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Crude oil futures extended their rally Wednesday (9/9) 
morning, with Brent's front-month contract surpassing the $100 bbl mark for the 
first time in nearly seven weeks as recent escalations in the U.S.-Iran war 
stoked supply fears.

   By 09:15am ET, ICE Brent for October delivery was up $2.71 to trade near 
$100.63 bbl, and NYMEX WTI for October delivery rose $2.72 to $95.75 bbl.

   Downstream, NYMEX ULSD for October delivery advanced $0.1321 to $4.6999 
gallon. RBOB futures bucked the trend, with the October contract retreating 
$0.0370 to $3.2155 gallon.

   The US dollar index softened by 0.145 points to 98.635 against a basket of 
foreign currencies.

   Tuesday's Houthi attacks on Saudi refineries and other oil processing plants 
not only marked the latest escalation in the conflict, but also took offline 
globally already limited operable refining capacity. The rally in oil prices 
was also fueled by the U.S. striking four more Iranian crude oil tankers on 
Tuesday, bringing the tally since Saturday to so far seven. The U.S. Navy said 
that the attacks were a response to an Iranian attempt to strike a U.S. warship 
in the region.

   Oil reportedly flowing through the Strait of Hormuz at around 40% of pre-war 
levels via a combination of dark transits through a U.S.-protected corridor and 
shuttling oil to tankers in the Gulf of Oman capped gains, as have ongoing 
crude flow diversions to ports outside of the Persian Gulf which Saudi Arabia 
and the UAE had established in response to the blockade of the waterway earlier 
this year.

   Amid fading prospects of a timely resolution to the now more than six-month 
long supply disruption, market participants hoping for lower prices may have to 
look to the significant drop in global demand. Six months of high energy prices 
have added to inflationary pressures and hampered economic growth. At the same 
time, high fuel prices have in some markets led to a drastic decline in refined 
product demand. Sinopec, China's largest state-controlled oil company, on 
Wednesday forecast hefty drops in domestic gasoline and diesel consumption this 
year, of more than 8% and 11%, year-on-year respectively.

   Several forecast updates due this week will also be parsed for signs of 
demand destruction. The U.S. Energy Information Administration's (EIA) 
Short-Term Energy Outlook for September is scheduled for release at 12pm ET 
today. EIA's weekly inventory report will be out on Thursday, delayed by one 
day due to Monday's federal holiday.

    




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