Oil prices rose as traders weighed increased flows through the Strait of Hormuz against escalating Iranian attacks on ships.
Brent crude rose to near $102 a barrel after a volatile session on Tuesday, while West Texas Intermediate crude surpassed $90.
While shipping through the Strait of Hormuz has improved in recent weeks, the UK Maritime Trade Operations (UKMTO) has reported at least nine attacks in the waterway so far this month. This already accounts for half the number of attacks recorded in the Strait of Hormuz and the Arabian Gulf combined during September.
U.S. Vice President J.D. Vance told Reuters in an interview that Tehran had targeted some ships, but not enough to halt the flow of oil and gas. He also emphasized that Washington remained open to reaching an agreement and was holding talks with Iranian President Masoud Pezeshkian and Foreign Minister Abbas Araqchi.
Crude oil prices have risen sharply this year after the war between the United States and Iran disrupted energy flows from the Middle East, fueling inflation. Senior oil industry officials, including Wael Sawan of Shell, warned this week that the world is running out of spare parts to cope with the fallout from the conflict, as global inventories dwindle and prices for products, including diesel, continue to climb.
Harris Khurshid, chief investment officer at Karobaar Capital LP, said: “The market is starting to believe that the barrel crossover can continue, and that’s why we’re seeing a portion of the geopolitical risk premium coming out.”
He added that declining inventories and tight diesel supplies mean that the actual market has a much smaller margin of safety than the headline export figures suggest.
Western inventories decline
At an industry forum this week, Shell's Sawan said that oil flows from the Middle East had recovered to about 80% of pre-conflict levels, while Russell Hardy of Vitol Group confirmed that around 12 million barrels per day of crude had flowed through the Strait of Hormuz in the past seven to ten days. This waterway connects the Arabian Gulf to global markets.
Separately, Saudi Arabia said it was pumping 5.8 million barrels per day through the pipeline crossing the country to the Red Sea. The pipeline was shut down as a precaution last month following drone attacks launched from Iraq.
Later on Wednesday, the International Energy Agency is scheduled to hold preliminary discussions on plans for the emergency release of up to 100 million barrels of diesel and crude oil stockpiles, which G7 leaders pledged last week, according to people familiar with the matter.
The talks are expected to provide more clarity on how to move forward with the plan.
In the United States, crude inventories fell by 2.1 million barrels last week, according to an estimate from the industry-funded American Petroleum Institute seen by Bloomberg.
The report also showed a decline in gasoline inventories, while distillate inventories rose. Official data is due later on Wednesday.
Trump is considering suspending the gasoline tax.
President Donald Trump said he is considering suspending the federal gasoline tax as his administration looks for ways to ease costs ahead of the November midterm elections.
Earlier this week, the US president relaxed rules regarding the use of diesel, allowing truck drivers to use fuel normally intended for tractors.
Traders were also watching what could become the first Atlantic hurricane of the year. The U.S. National Hurricane Center said Tuesday that a tropical depression had formed about 630 miles, or 1,015 kilometers, south of the mouth of the Mississippi River.
It is expected to become a tropical storm, Isaias, by Wednesday, and reach hurricane strength by Thursday, with the possibility of hitting the U.S. Gulf Coast.
While current forecasts place the storm east of major offshore oil and natural gas production areas in southern Louisiana and Texas, disruptions could occur depending on its path and size.
Chevron said it is evacuating non-essential personnel from its Gulf of Mexico platforms, but no production adjustments have been made.
Latest price movements
Brent crude for December delivery rose 1% to $101.55 a barrel at 11:14 a.m. in Singapore.
West Texas Intermediate crude for November delivery rose 0.9% to $90.25 a barrel.
