Brent crude oil has surpassed the $100 mark, reaching $101.21 per barrel on September 9, its highest level since May 22. West Texas Intermediate also surged to $96.05, a high not seen since late May. Both Brent and WTI have seen a 60% increase year-to-date. Alaska North Slope (ANS) crude also neared or exceeded $100 on September 9, having closed at a $1.15 premium over Brent on September 8.
Several factors are contributing to this surge in prices. The Strait of Hormuz conflict, now in its sixth month, has been exacerbated by US Central Command striking five Iranian crude-oil tankers after Iran targeted a US Navy warship. In retaliation, Iran launched strikes at a US military base in Jordan, two US Navy vessels, and eight oil tankers in the Strait of Hormuz. Additionally, Houthi attacks on oil facilities in Saudi Arabia have led to the shutdown of some assets, and a Saudi pipeline outage is threatening a loss of 4% of global oil supply. US Energy Secretary Chris Wright expressed skepticism about a consensual agreement with Iran regarding passage through the Strait of Hormuz, stating that markets would need to continue relying on transit workarounds that are still supplying 10 million barrels per day.
The global oil crisis is deepening, pushing inflation higher and complicating central bank policies. Lukman Otunuga, head of market research at FXTM, highlighted that Brent crossing $100 is a significant psychological milestone, but the primary concern is its implications for inflation. Despite these challenges, Chinese crude purchases have resumed, pushing several market indicators to their strongest levels in weeks and contributing to ANS crude shifting to a premium over Brent. Ryan McKay, senior commodity strategist at TD Securities, noted that while the market deficit has eased, it remains tight, with further tightness possible due to renewed attacks and increased Chinese activity.
Rystad Energy noted that the global energy system has absorbed an extraordinary disruption to Middle Eastern supply better than expected, largely due to China's role as a swing oil consumer and the use of alternative export infrastructure. After US and Israeli attacks on Iran in February, an estimated 15 million barrels per day of crude were lost, leading to forecasts of Brent crude exceeding $150 a barrel. However, oil has averaged around $90 over the past six months, partly due to inventories and China absorbing much of the shock. Claudio Galimberti, Rystad's chief economist, warned that with declining inventories, China's balancing role is becoming a key oil market risk. US commercial crude oil inventories fell by 300,000 barrels in the week ended September 4, and the Strategic Petroleum Reserve was drawn down by 1.2 million barrels to 285.4 million barrels.
