Oil market steadies on Middle East supply risks, weekly gains intact

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Oil market steadies on risks

Highlights

Brent crude rises 0.34% to $106.28 a barrel and WTI slips 0.19% to $97.78 as Middle East supply risks and a larger-than-expected U.S. crude stock draw support prices.
Kpler reports intensified Iranian attacks have sharply lowered Gulf crude flows, with recovery expected to remain slow and uneven absent a political deal.
European diesel refining margins drop nearly 2% to $78.67 a barrel after the IEA agrees to release over 20 million barrels, though margins peaked at $95 in September on tightening supplies.

Supply risks and inventory draw shape trading

As reported by Pakistan Business Recorder, oil prices steady on Friday as uncertainty over Middle East supplies and a larger-than-expected draw from U.S. crude stockpiles keep the market supported. Brent crude futures are up 36 cents, or 0.34%, at $106.28 a barrel at 1107 GMT, while U.S. West Texas Intermediate crude futures are down 19 cents, or 0.19%, to $97.78.

Saxo Bank analyst Ole Hansen says the relative stability reflects a market caught between persistent supply disruption risks in the Middle East, where attacks on ships in and around the Strait of Hormuz continue to underpin prices. WTI settles up more than 3% on Thursday after a large U.S. crude stock draw linked to hurricane-related production shut-ins.

The IEA's pledge to release the remaining 100 million barrels under its March agreement, together with reports that the U.S. is considering easing sanctions on some dark fleet tankers, may be weighing slightly on sentiment, Hansen says. He adds that the International Energy Agency release is unlikely to ease diesel supply tightness.

Diesel margins fall as Hormuz flows remain under pressure

Supply concerns also rise as attacks around the Strait of Hormuz surge over the past 10 days, with Iran saying it is stepping up strikes in response to the U.S. blockade of its ports and tougher sanctions introduced last month. Kpler analysts say in a Thursday report that intensified Iranian attacks drive Gulf crude flows sharply lower, and they expect a slower and more uneven recovery in Hormuz flows in the absence of a comprehensive political deal.

European diesel refining margins fall by nearly 2% on Friday to $78.67 a barrel after the IEA agrees on Thursday to release more than 20 million barrels of the fuel to the market. Those margins rise as high as $95 a barrel in September as diesel supply tightens because of wars in Ukraine and Iran.

In our earlier article on the surge in oil shipping costs, we explained how conflict-related risks around key routes such as the Strait of Hormuz and the Red Sea pushed tanker and insurance rates sharply higher. We also noted that rising freight bills were becoming a meaningful part of the delivered oil price, adding pressure to fuel costs for importers and squeezing refiners even as tanker owners benefited from record earnings.

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