Oil prices surged above $100 a barrel on Wednesday, reaching their highest close since May 22, as escalating attacks on shipping near the Strait of Hormuz raised concerns that Middle East supply disruptions could worsen. Brent crude futures rose $3.29, or 3.4%, to settle at $101.21 per barrel, after reaching $101.58 during the session. U.S. West Texas Intermediate (WTI) crude gained $3.02, or 3.25%, to settle at $96.05 per barrel.<\/p>\n\n\n\n
The latest attacks represent a significant escalation in the six-month-old conflict. Iran reported attacks on 10 ships near the Strait of Hormuz, while the U.S. reportedly sank five Iranian oil tankers. The attacks have increased concerns about the safety of commercial shipping and the ability to move crude and refined products through the region.<\/p>\n\n\n\n
Traffic through the Strait of Hormuz remains well below pre-war levels. Approximately 20% of the world’s oil and gas supply normally moves through the waterway. Preliminary Kpler data showed just six commodity vessels passed through the strait on Tuesday, down from nine the previous day and below the 10-day average of approximately 12 vessels.<\/p>\n\n\n\n
Oil flows through the strait have also fallen sharply. Rystad Energy estimates that 8 million to 9 million barrels per day were moving through the waterway in the week before fighting resumed on August 30. More recently, flows have fallen below 2 million barrels per day.<\/p>\n\n\n\n
The supply concerns extend beyond the strait. A tanker carrying approximately 2 million barrels of Iraqi fuel oil was struck by a drone in Iraqi territorial waters, while several merchant vessels in the Gulf reportedly suffered disabling fires. A seafarer was also killed in an incident involving an oil-products tanker near Dubai.<\/p>\n\n\n\n
Attacks on Saudi energy facilities by Iran-backed Houthis earlier this week have added another layer of risk, threatening both Saudi production infrastructure and shipments moving through the Red Sea, an important alternative route around the Strait of Hormuz.<\/p>\n\n\n\n
The physical crude market is already reflecting the tighter supply environment. The dated Brent benchmark has traded above $100 per barrel since September 3, while U.S. gasoline prices are averaging approximately $4.22 per gallon and diesel prices remain at record levels, approaching $6 per gallon.<\/p>\n\n\n\n
The U.S. Energy Information Administration raised its oil-price forecasts for this year and next on Wednesday as global inventories decline under pressure from the loss of Middle Eastern supply. <\/p>\n\n\n\n