Oil prices stabilize as Middle East conflict keeps supply concerns elevated

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Oil prices stabilize

Highlights

Brent holds near $106 amid Hormuz supply risks.
U.S. inventory draw supports stronger WTI gains.
IEA releases and sanctions plans temper prices.

December Brent futures slipped 0.09% to $105.82 a barrel, while November West Texas Intermediate (WTI) futures rose 0.10% to $98.07. Brent was on track to gain about 1.2% for the week, while WTI was up 6.5%. Supply disruptions, emergency fuel releases, and possible sanctions relief continued to influence oil prices, Reuters reports.

Middle East tensions threaten crude shipments

Attacks on commercial vessels near the Strait of Hormuz have intensified over the past 10 days, raising concerns about the reliability of oil deliveries from the Persian Gulf. Iran has announced an escalation of strikes in response to the U.S. blockade of its ports and tougher sanctions introduced last month. The continued violence has complicated efforts to restore normal shipping activity through the strategically important waterway.

Energy analysts at Kpler expect crude shipments through Hormuz to recover slowly and unevenly without a comprehensive political agreement. That uncertainty has helped sustain oil prices despite efforts to bring additional supplies to market. Traders remain focused on whether further disruptions could restrict exports from major Middle Eastern producers.

US stockpile decline supports WTI prices

WTI gained more than 3% Thursday after U.S. crude inventories fell more sharply than expected following hurricane-related production shutdowns. The stockpile decline reinforced concerns about near-term availability and helped the American benchmark outperform Brent over the week. However, Friday's limited price movements suggested that traders were also considering the potential impact of additional supply.

The International Energy Agency agreed Thursday to release more than 20 million barrels of diesel, easing some pressure on European fuel markets. European diesel refining margins subsequently fell nearly 2% to $78.67 a barrel, compared with a September peak near $95. The agency also plans to release the remaining 100 million barrels covered by its March agreement, although additional crude may not fully resolve diesel shortages.

Sanctions decisions could reshape oil supply

Washington is considering easing restrictions on certain shadow-fleet tankers that have transported petroleum from Russia, Iran, and Venezuela. The proposal is intended to reduce exceptionally high shipping costs and could make more transport capacity available. It follows a temporary U.S. decision to lift sanctions on Russian diesel, which drew criticism from Ukraine and European governments.

The competing developments leave oil markets exposed to sudden changes in supply expectations. Emergency releases and sanctions adjustments could moderate prices, but continued attacks around Hormuz threaten the movement of physical crude. The direction of Brent and WTI will depend heavily on whether shipping conditions stabilize before temporary supply measures lose their effect.

As we previously reported, Houthis expand campaign as attacks raise pressure on the Saudi economy.

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