Oil rebounds after tanker attacks near Strait of Hormuz

Brent crude rose more than $3 a barrel on Thursday, November 5. New attacks on tankers in the Gulf revived supply worries a day after oil had its steepest selloff in months. Brent settled up over $3 after the tanker attacks, finishing at $98.29, up $3.67. U.S. West Texas Intermediate gained $2.40 to $90.52.reuters.com+1

The rebound recovered part of Wednesday's losses. On that day, both benchmarks fell more than 8% to settle at their lowest since August 31. Traders were betting that heavy Republican losses in Tuesday's midterm elections would make further escalation of the U.S.-Israeli war on Iran less likely. The war, which began in February, and the higher fuel prices that followed were major grievances for voters.cnbc.com

Tanker attacks return to focus

Iran's Islamic Revolutionary Guard Corps said two oil tankers and a tugboat caught fire in separate incidents after trying to use what it called unauthorised routes through the Strait of Hormuz. Separately, a British military tracking agency reported that a tanker was hit by two unidentified projectiles about 50 nautical miles north of Qatar. At least five vessels have reported incidents since Sunday, according to the UK maritime agency UKMTO. That is close to October's pace, when 35 ships were hit, the most of any month of the war.virginiabusiness.com+2

"The situation in the Middle East is still unresolved and that's why there is some modest recovery in prices," UBS commodity analyst Giovanni Staunovo said. June Goh of Sparta Commodities said more volatility lies ahead, because the path to diplomacy "is still wrought with many unknowns while the global strategic reserves have drawn very thin."cnbc.com

Escalation scenarios

Citi said in a note that with the midterms over, the White House could lean on its executive powers in foreign policy and possibly escalate the conflict. Eurasia Group lowered its estimate of the chance of renewed U.S. strikes to 60% from 65%. It also halved the probability of a deal to 10% and raised the odds of a continued standoff to 30%. The firm said that if escalation happens, Brent could jump into a range of $110 to $125.cnbc.com

Supply picture

Some fundamentals point the other way. Crude flows through Hormuz have returned close to pre-war levels, though at higher cost. JPMorgan estimates the global market moved back into surplus, reaching 1.4 million barrels per day in October. Still, commercial inventories in major consuming countries are near 15-year lows. U.S. crude, gasoline and distillate stocks all fell last week as demand reached a one-year high, the Energy Information Administration said.cnbc.com