Oil prices surged following growing fears of possible wider war between the United States and Iran, which could increase further disruption of shipping through the Strait of Hormuz. Global benchmark
Brent rose roughly 4.6 percent to settle around $88, notching its biggest weekly advance since April. The commodity extended gains on Friday after Axios reported that the US is sending dozens of refueling planes to Israel, raising expectations of a near-term escalation in the conflict that has roiled energy markets in recent months.
The development compounded bullish momentum after Iran attacked Kuwaiti water and power plants, with many power-generation units sustaining damage. The US earlier carried out another wave of strikes on Iran, hitting targets including defense sites, in a sixth straight day of hostilities.
“No one is going home short this weekend,” said Darrell Fletcher, managing director for commodities at Bannockburn Capital Markets. Managed money piled into outright bullish crude oil bets at the fastest pace in nearly a decade last week as renewed military action rattled traders, though the fighting remains far less intense than at the height of the war in March and early April.
Before then, positioning had been hovering near seven-month lows. Traders boosted bullish oil bets as geopolitical tensions increased risks to global energy and fuel markets.
Crude has soared to near its highest in about a month, paring a roughly 30 percent decline in the second quarter, as the escalation revives concerns over traffic through Hormuz, the chokepoint for about a fifth of global oil flows before the war.
The conflict has also impacted the supply of fuels such as diesel and gasoline, sending profit margins for US refiners to records. Canada’s largest oil refinery is planning to shut down for maintenance in the fall, potentially exacerbating fuel market tightness in parts of the US that rely on the plant for fuel imports.
The squeeze also coincides with a plunge in Russian exports after Ukraine attacked the country’s refineries and prompted Moscow to ban diesel exports. US lawmakers are looking to add to that pressure, as senators released the text of a bill to sanction buyers of Russian oil.
“Refined products are much more of a squeeze than crude oil. “We only had that short-term peace when energy executives were warning that we’ve been drawing down inventories, there’s really not a lot of slack left in the system,” said Simon Lack, a portfolio manager at the Catalyst Energy Infrastructure Fund.
Meanwhile, Iran has continued strikes on its Gulf neighbours as well as maritime attacks on vessels transiting Hormuz, insisting all ships seek its permission before sailing through the strait. The heightened tensions are making shippers more wary, and traffic through the critical energy chokepoint has slumped in the past 10 days.
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. Scrutiny has grown on whether flows through the waterway would continue after Iran targeted vessels that were shuttling barrels out for the United Arab Emirates earlier this week.
