Brent Crude Settles at Six-Month High of $117.64 After Hormuz Tanker Attack

Synopsis

The price of Brent crude futures rose 2.4 per cent to $117.64 a barrel on Friday, the highest since the end of April, as traders awaited the possibility of a new phase of escalation in the Iran war after the Nov. 3 U.S. midterm elections. Supply risks were highlighted during an attack on a tanker in the Strait of Hormuz. Brent edged 13.6 per cent higher in October. The December expiring contract for the downstate series closed at $113.43, which was higher than the January expiring series.The downstate series settled at $113.43 in the expiring December contract, versus the January expiring contract.

A six-month high

December futures for Brent crude, which closed on Friday, rose $2.76, or 2.4 per cent, to $117.64 a barrel, the highest settlement since the end of April. Oil finished $2.63 higher at $113.43 on the more active contract to $2.12 at $104.12 on the U.S. West Texas Intermediate contract. Brent prices tumbled 13.6 per cent and WTI prices dipped 15.2 per cent for October.

The contracts are read out loud

The December contract closed $4.21 higher than the previous month's January. A backwardation market occurs when the price of the goods is higher for the nearer dated than the later dated market and typically reflects a tight prompt supply. The $117.64 amount is for an expiring benchmark and not necessarily the most actively traded.

Supply risks

A small boat loaded with explosives attached them to a tanker in the Strait of Hormuz, the British maritime security service, UKMTO, said. Maritime sources said it was the first known successful use of the limpet-mine in the waterway since the U.S.-Israeli war against Iran started in February, but the culprits were not immediately identified.

The U.S. embassy in Riyadh said that non-emergency government personnel and families had been instructed to evacuate from Saudi Arabia due to attacks by the Hou this week on civilian airports and critical infrastructure. The Houthis claimed responsibility for hitting oil facilities in Saudi Arabia, particularly the Ras Tanura and Rabigh refineries, but Saudi crude exports increased in October over September, sources from two of three ship-tracking firms said.

Diplomacy and forecasts

The mediators from Qatar returned to Tehran on Friday to continue talks with Iran for a U.S.-Iran agreement. There was no response from Iran to a letter from Vice President JD Vance, the semi-official Tasnim agency reported.

Saxo Bank believes that the price of crude will stay in the $70–$90 range even after the war, whereas prices were in the $60–$70 range before the conflict, so volatility could increase around Israel's upcoming elections and around the U.S. election scheduled for November 3. Financial giant Goldman Sachs has sounded the alarm over the possibility of a move to $120.

Besides the price level, it has a direct impact on the demand for dollars in India, where crude oil imports are almost 89 per cent.