Brent crude prices fluctuated near their highest levels in five months, as traders weighed the risk of further Iranian attacks in the Strait of Hormuz against the continued strong flow of crude oil from the Arabian Gulf.
The global benchmark crude traded below $110 a barrel, near its highest level since May, while the most active contract for West Texas Intermediate crude traded at around $99.
Iran's first vice president, Mohammad Reza Aref, said on Monday that Iran has no option but to assert control over the Strait of Hormuz to protect the country's security, according to a report by the official Iranian news agency IRNA.
Despite the recent escalation of hostilities around the waterway, crude oil exports from the Arabian Gulf have continued at a rapid pace. U.S. Energy Secretary Chris Wright told Fox News that flows have recovered to about 80% of their pre-war levels, although restrictions on shipments of refined petroleum products remain in place.
Brent crude has risen by about 80% this year, as escalating conflicts in the Middle East and between Russia and Ukraine have disrupted energy supplies. Refined petroleum products have seen even steeper gains, with European diesel futures surging. Renewed attacks on tankers and energy infrastructure are keeping geopolitical risks high, even as crude oil flows from the Arabian Gulf recover.
Hamad Hussain, a commodities economist at Capital Economics Ltd, said: “The risks to oil prices are clearly tilted to the upside. The escalating attacks on ships increase the likelihood of a further decline in oil supplies and a continued rise in prices.”
Iran wants to control Hormuz
Iran's first vice president asserted that Iran could guarantee safe passage through the Strait of Hormuz for friendly nations, but warned that the United States was responsible for the current situation and must pay the price. He made these remarks during a meeting in Tajikistan with Russian Prime Minister Mikhail Mishustin.
Iraq is among the Gulf producers that have increased crude oil flows, with the Iraqi oil minister stating that exports have exceeded 3.4 million barrels per day since the beginning of this month. Shipments are now approaching pre-war levels, after Iraq, an OPEC member, offered significant discounts compared to regional benchmark prices.
Meanwhile, the Trump administration is allowing the sale of sanctioned oil tankers so they can legally transport crude, according to Wright. This move aims to increase maritime transport capacity at a time when the trade war between the United States and Iran is straining supplies and driving up shipping costs. Wright estimates the number of ships in the global shadow fleet at around 1,600.
Latest price movements
Brent crude for December delivery rose 0.2% to $109.77 a barrel at 10:01 a.m. Singapore time.
West Texas Intermediate crude for December delivery settled at $98.67 a barrel, after closing down 0.5% on Monday. The November contract, which expires on Tuesday, saw little change at $103.77 a barrel.
