Oil Surges Amid Middle East Supply Risks

Brent crude surged up to a high of nearly 89$/bbl earlier before pulling back slightly amid Middle East tension and the threat to future crude supplies from the region although there is no immediate impact of flows.

• Brent DEC 23 up 3.4% at 87.47$/bbl
• WTI NOV 23 up 3.8% at 85.92$/bbl
• Gasoil OCT 23 up 4.3% at 905.5$/mt
• WTI-Brent down -0.08$/bbl at -3.33$/bbl
• There are reports that Iran was involved in the Hamas attack on Israel and reprisals on Iran could risk crude shipping through the Strait of Hormuz, which the state has previously warned it could close. Only recently the US eased sanctions on Iran to allow more oil shipments. Some analysts have reduced expectations that Saudi Arabia will ease the current voluntary production cuts.
• The risk to supplies offsets the focus on demand concerns from last week with possible future major central bank interest rate rises and the bearish impact from a stronger USD.
  • Brent DEC 23-JAN 24 up 0.13$/bbl at 1.58$/bbl
  • Brent DEC 23-DEC 24 up 0.88$/bbl at 8.11$/bbl
• The tensions have supported the strong curve backwardation with gains in both the prompt and longer term spreads adding to the strength driven by tight supplies and OPEC+ output cuts until year end.
• Diesel markets regain some ground with the partial lifting of the Russian fuel export ban last week although exports could still be restricted by a prohibitive fuel duty for gray exporters and companies must supply no less than 50% of diesel to the local market. Gasoline markets are holding steady after a nearly four week decline driven by weak demand.
  • US gasoline crack down -0.3$/bbl at 8.93$/bbl
  • US ULSD crack up 1.2$/bbl at 40.55$/bbl