Brent hits five-month high amid Iran’s Hormuz threats

Brent crude rose above $110 a barrel on Tuesday, October 20, its highest level since May. Traders are weighing an escalating campaign of attacks on tankers in the Strait of Hormuz against Gulf crude exports that have held up better than many expected. Brent futures for December delivery reached their highest price since May 19 during the session, CNBC Comcast Corporation ↘ 0.66% reported. Brent has climbed about 80% this year as conflicts in the Middle East and between Russia and Ukraine disrupt supply, according to Bloomberg.energyconnects.com+1

Tehran's warning on Hormuz

Iran's First Vice President Mohammad Reza Aref said on Monday that Tehran has "no choice" but to assert control over Hormuz to protect its security, according to the state-run news agency IRNA, Bloomberg reported. Speaking in Tajikistan alongside Russian Prime Minister Mikhail Mishustin, Aref said Iran could guarantee safe passage for friendly nations, but that "the US is now the cause of the current situation and must pay the price."energyconnects.com

The threats are being carried out at sea. The ship tracker Kpler says at least 18 vessels have been attacked over the past two weeks, and Iran's Revolutionary Guard said on Tuesday that two "non-compliant" tankers caught fire after hitting mines laid by its navy, CNBC reported. Yemen's Iran-aligned Houthis also said they attacked Saudi targets, including a Saudi Aramco site in Yanbu, the Shaybah oilfield and Riyadh's King Khalid International Airport. Saudi authorities did not immediately confirm the claims, Reuters reported via The Edge Malaysia Thomson Reuters Corporation ↘ 0.07%.theedgemalaysia.com+1

Flows hold up, for now

US Energy Secretary Chris Wright told Fox News ↘ 2.24% that Gulf crude flows had recovered to about 80% of prewar levels, though refined-product shipments are still constrained, according to the Straits Times. Iraq's oil minister said exports have exceeded 3.4 million barrels a day so far this month. Wright also said the Trump administration is authorizing the sale of sanctioned "dark fleet" tankers so they can legally carry crude. He estimated the global dark fleet at about 1,600 vessels, Bloomberg reported.straitstimes.com+1

Not all the data agrees with that picture. Kpler said crude flows through the region fell to a seven-day average of about 8.5 million barrels a day last week, down from more than 20 million the week before, Reuters reported. Analysts at ANZ warned that early data suggests flows may have slowed again, Investing.com reported.live.euronext.com+1

A persistent risk premium

ING ↘ 1.85% analysts said the market is "pricing in a significant risk premium." They added that if flows continue uninterrupted, "the risk premium would likely erode slowly. Clearly, there are no signs of this yet," according to Reuters. Hamad Hussain of Capital Economics said that "the risks to oil prices clearly lie to the upside," Bloomberg reported.theedgemalaysia.com+1