Oil prices remain at 3-month high amid renewed blockade of the Strait of Hormuz

Mutual strikes by the US and Iran on military facilities and oil tankers have once again halted the passage of ships through the Strait of Hormuz, keeping oil prices at their highest level since May.

 

November Brent crude futures rose 9.3% during the week to a 3.5-month high of $96.2/barrel (+18% for the month).

 

Crude oil prices rose to a six-week high on signs of a tightening global supply. Saudi Arabia’s crude exports fell to a nine-year low of 3 million barrels per day in August, according to data compiled by Bloomberg, Kpler and Vortexa. Hostilities between the United States and Iran also escalated this week, dampening hopes for a full opening of the Strait of Hormuz anytime soon. Iran fired ballistic missiles at U.S. destroyers and hit three oil tankers in the Strait of Hormuz, while the United States responded by attacking three Iranian tankers near Kharq Island, Jask and the Gulf of Oman.

 

Today is a Labor Day holiday in the US, so markets will be inactive.

 

Saudi Aramco's surprise decision to keep the price of Arab Light crude oil unchanged for Asian buyers for October delivery, while the market had expected it to increase by $5/barrel, is also having a calming effect on crude oil prices.

 

Yemeni Houthis have launched a ground operation against government forces, trying to seize commanding heights along the Bab el-Mandeb Strait to establish control over the passage of ships, as Iran does in the Strait of Hormuz.

 

We expect the US to increase military pressure on Iran to force it to negotiate, especially ahead of the Trump-Xi meeting in two weeks, as Trump needs to lower oil prices before the start of the congressional elections.