LONDON: Oil prices rose more than 2% on Thursday, extending a rally as the escalating U.S.-Israeli war with Iran disrupted supplies and shipping, prompting some major producers to cut output and others to take measures to ensure supply security.
Brent crude was up $2.25, or 2.8%, at $83.65 per barrel by 1251 GMT, a fifth session of gains. U.S. West Texas Intermediate crude rose $2.56, or 3.4%, to $77.22.
Prompt Brent crude futures’ premium to the six-month contract reached its widest since July 2022, indicating supply tightness in the global oil market.
Renewed attacks on tankers in the Gulf, along with Chinese measures to reduce fuel exports, pushed prices higher, said UBS analyst Giovanni Staunovo. The refined product market is also showing signs of stress due to missing Middle East exports, he added.
Some oil refineries in the Middle East, China and India shut their crude units because of the raging conflict in the Middle East.
As a result of a lower supply outlook in fuel markets, European diesel futures reached their highest level since October 2022, at $1,130.
Continued attacks on oil tankers
Attacks on oil tankers continued on Thursday in the Gulf, as the Bahamas-flagged crude oil tanker Sonangol Namibe reported its hull was breached after a blast near Iraq’s Khor al Zubair port.
Around 300 oil tankers remained inside the Strait of Hormuz as vessel traffic in and out of the chokepoint nearly halted following the outbreak of war, according to ship tracking data from Vortexa and Kpler that excludes some of the smallest tankers.
Gas prices also rose on Thursday, after President Vladimir Putin warned Russia could halt its remaining gas flows to Europe, adding to concerns about supply after Qatar announced force majeure on LNG shipments.
European benchmark gas prices were up by 5% at 51.44 euros per megawatt-hour by 1244 GMT, having risen by 8.3% to 52.80 euros/MWh earlier in the session.
Iran launched a wave of missiles at Israel early on Thursday, sending millions of residents into bomb shelters as the conflict entered its sixth day, and just hours after moves to halt the U.S. attacks were blocked in Washington.
On Wednesday, a U.S. submarine sank an Iranian warship off Sri Lanka, killing at least 80 people, and NATO air defences destroyed an Iranian ballistic missile fired towards Turkey.
Crude oil supplies from Iraq and Kuwait could start shutting in within days if the Strait remains closed, potentially cutting 3.3 million barrels per day (bpd) by day eight of the conflict, J.P. Morgan analysts said in a note.
Iraq, the second-largest crude producer in the Organization of the Petroleum Exporting Countries, has cut output by nearly 1.5 million bpd for lack of storage and an export route, officials told Reuters.
Qatar, the biggest liquefied natural gas producer in the Gulf, declared force majeure on gas exports on Wednesday, with sources saying a return to normal production volumes may take at least a month.
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