Oil Up 4 Percent on Hormuz Attacks and US Storm Threat

Oil climbed about 4 percent on Thursday as attacks on shipping in the Gulf and the Strait of Hormuz deepened supply fears, while a tropical storm threatens U.S. offshore production.

By 12:17 p.m., U.S. West Texas Intermediate (WTI) crude rose $3.47, or 3.9 percent, to $92.40. Brent crude futures had climbed $4.20, or 4.15 percent, to $105.41 a barrel.

Oil prices had settled lower on Wednesday after the International Energy Agency (IEA) said its members had agreed to speed up the release of emergency oil stocks and to prioritise diesel.

However, continuing threats to shipping in the Strait of Hormuz keep markets on edge.

At least 9 tankers reported being struck by unidentified projectiles since the beginning of October, according to the UK Maritime Trade Operations (UKMTO).

The incidents involved crude oil, LPG, and other tankers, several of them transiting outbound. In a number of cases, the projectiles caused fires or damage to engine rooms, including one blaze on Oct. 5 that the crew was still fighting when the alert was issued.

No casualties or environmental damage have been reported so far, and in at least two cases, the crews confirmed they were safe.

Separately, the UKMTO said a tanker heading into the strait on Oct. 5 was hailed by Iran’s Islamic Revolutionary Guard Corps (IRGC) about 11 nautical miles north of Khasab, Oman, and told to turn back or be targeted; the master complied.

The UKMTO didn’t name the party responsible for the strikes, saying only that investigations are ongoing and urging vessels to transit with caution.

The weather is also adding to the pressure on markets. Shell and Chevron said on Wednesday they were cutting offshore operations in the Gulf as Tropical Storm Isaias approached the north shore, threatening output in the United States.

The storm formed in the Gulf on Wednesday and is forecast to strengthen into a hurricane before reaching the southern U.S. coast early on Saturday, bringing heavy rain, storm surges, and possible tornadoes across several states, according to the National Hurricane Center.

Phil Flynn, an analyst at Price Futures Group, warned on Wednesday that the storm could cause shut-ins and refinery problems at a time when diesel was already tight because of the Iran war, calling a Gulf Coast hit “the last thing this market needs.”

Pressure on Shipping

The U.S. Navy-led Joint Maritime Information Center (JMIC) said on Oct. 4 that disruptions in Hormuz by the IRGC demonstrate “Iran’s ⁠intent to assert presence along key transit lanes and maintain pressure ​on transiting vessels.”

Iran’s military leadership on Thursday said it has reasserted its control over the Strait of Hormuz.

Iranian army commander Brig. Gen. Mohammad Hossein Dadras said Iran’s armed forces were “more prepared than at any other time.” The remarks, carried by Iran’s state news agency IRNA, did not address the recent attacks on shipping in the strait.

They also came after senior Revolutionary Guards adviser Brig. Gen. Mohammad-Reza Naqdi told the Al-Alam news network on Wednesday that Tehran has “full control” of the waterway.

He added that the amount of “smuggled” oil passing through the strait was minimal and that small-boat routes used to move it to larger tankers would soon be closed.

U.S. Central Command on Wednesday rejected the claim, saying Washington and its regional partners were in control of the waterway.

“Traffic is flowing through the Strait of Hormuz right now carrying commercial goods and energy supplies, including 20 million barrels of crude oil,” Central Command said.

The U.S. Energy Information Administration said on Wednesday that Middle East oil flows would likely stay constrained through the end of 2026, but that convoys through the Strait of Hormuz and workarounds such as bypass routes and ship-to-ship transfers should lift regional output and exports.

Reuters contributed to this report.