Brent nears $110 as Middle East supply risks persist

Crude oil futures advanced on Friday, moving toward a weekly gain driven by uncertainty over Middle East supplies and a significant drawdown in United States crude inventories. Brent contracts surged more than $3 to reach $109.58 per barrel, while West Texas Intermediate rose over $2, crossing the $100 mark.

Middle East supply concerns

Ole Hansen, an analyst at Saxo Bank, noted that relative market stability reflects ongoing exposure to supply disruption risks in the region. He stated that attacks on vessels in and around the Strait of Hormuz continue to negatively impact pricing.

Hansen added that sentiment may have been influenced by the International Energy Agency’s commitment to release the remaining 100 million barrels under its March agreement. Reports indicating the United States is considering easing sanctions on certain shadow fleet tankers also affected market mood, though Hansen suggested this move is unlikely to alleviate diesel supply tightness.

Diesel margins and IEA actions

European diesel refining margins dropped approximately 2% on Friday to $78.67 per barrel. This decline followed the International Energy Agency’s approval on Thursday to inject more than 20 million barrels into the market.

These margins had previously risen to $95 per barrel in September, coinciding with reduced diesel supplies attributed to conflicts in Ukraine and Iran.

US policy and shipping costs

Supply anxieties intensified over the past ten days due to increased attacks near the Strait of Hormuz. Iran announced it was escalating strikes in response to the American blockade of its ports and stricter sanctions imposed last month.

The United States is evaluating the removal of sanctions on specific vessels within the so-called "shadow fleet" transporting oil and petroleum products from nations including Russia, Iran, and Venezuela. This potential regulatory shift aims to lower global shipping rates, which have reached record highs.