The oil market on Thursday found itself in a curious position, with prices rising by degrees due to heightened Middle East tensions, but also lacking momentum in the absence of any major escalation of hostilities.
By 0813 GMT, Brent for October delivery rose $1.20 to $92.82 per barrel, while West Texas Intermediate for September added 92 cents to $86.75 per barrel.
This contributed to oil heading towards a substantial weekly gain, based largely on Washington’s plan to isolate Iran’s economy – which caused analysts to worry about further market disruptions.
Details about the initiative, which U.S. president Donald Trump said will also affect any countries that deal with the Islamic republic, are expected on Monday.
But war concerns seemed to be losing the element of panic that had fuelled earlier rallies;
Hiroyuki Kikukawa, chief strategist of Nissan Securities Investment, remarked, “Oil prices remained elevated as the market is supported by sporadic attacks in the Middle East but lacks fresh momentum without a major escalation.
“The market is likely to maintain a gradual upward trend given uncertainty over peace talks and tensions involving the United Arab Emirates, Oman and Iran.”
Just as mixed messages remained about the war between the U.S. and Iran and who controls the Strait of Hormuz, the true state of the oil market also seemed murky.
Case in point: the Energy Information Administration disclosed that U.S. stockpiles of distillate fuel, including diesel and heating oil, fell last week for a third week; however, crude inventories unexpectedly rose by 4.4 million barrels.
Meanwhile, the war continued to reshape the global supply trade in interesting ways, the latest involving China: Kpler data showed that country’s seaborne imports of Russia crude were estimated at 1.25 million barrels per day in August, down from 1.42 million bpd in July – but July and August remaining China’s strongest months for Russian imports.
Julianne Geiger, market analyst and Oilprice.com, noted that China is squeezing India out of Russia’s oil trade, with India’s imports now estimated at 1.8 million bpd in August, “down sharply from a record 2.79 million bpd in July and 2.73 million bpd in June.
Geiger warned that “If India cannot replace the Russian barrels now being diverted toward China, September fuel exports could be the next thing to shrink.”