Oil heads for second weekly gain as Hormuz attacks mount

Oil prices slipped in Asian trading on Friday, October 16, but were still on track for a second straight weekly gain. Attacks on shipping around the Strait of Hormuz and Houthi strikes on Saudi energy sites kept a risk premium in crude. So far this week, Brent was up 0.44% and US West Texas Intermediate had jumped 5.81%, Reuters reported. WTI got an extra lift from a large draw in US crude stockpiles.think.ing.com

Ship sinks in Hormuz

US Central Command said on Thursday, October 15, that an Iranian projectile hit a container ship that later sank in the Strait of Hormuz, CNBC-TV18 reported, citing Bloomberg. The Singapore-flagged GFS Pride went down while being towed to shore, and Central Command blamed Iran's Islamic Revolutionary Guard Corps. Even so, more than 40 vessels crossed the strait over the previous 24 hours.cnbctv18.com

Attacks around the strait have surged over the past 10 days. Iran says it is stepping up strikes in response to the US blockade of its ports and tougher sanctions introduced last month, according to Reuters. Ship-tracking firm Kpler estimated that cargo moving through Hormuz averaged 11.62 million barrels per day over the seven days to October 13. That is about 68% of the normal baseline, and Kpler expects a slow, uneven recovery unless there is a broad political deal.rmb.reuters.com

In Saudi Arabia, the Houthis hit an administrative building at the Dhahran headquarters of Saudi Aramco late on October 13, starting what the Saudi energy ministry called a "limited fire," the BBC reported. A Houthi military spokesman said the group would keep "targeting Saudi enemy airports and oil facilities." Sources told Reuters the damage was extensive but that Aramco was still operating normally.reuters.com+1

A deal is needed to remove the premium

"Uncertainty in the Middle East and concerns over the sustainability of oil flows through the Strait of Hormuz has the market pricing in a significant risk premium," ING analysts wrote. In a note published Friday, they said removing that premium completely would take "some kind of agreement between the US and Iran." ING added that Brent has been sliding early in each session, then recovering most of the losses by the close, which has kept it above $100 a barrel.think.ing.com

Stockpile release fails to calm prices

Members of the International Energy Agency (IEA) agreed to release the remaining 100 million barrels of the emergency reserves they pledged in March, including 20 million barrels of diesel. They have already released about 330 million barrels, ING noted. US data showed commercial crude inventories fell by 8.56 million barrels last week, the biggest weekly drop since February, partly because a hurricane shut in offshore production.think.ing.com

Haitong Futures said the overnight rise in prices showed "investors were dissatisfied with these measures," according to Reuters. "What would really cool the oil market is an easing of tensions in the Middle East."rmb.reuters.com