Oil on Track for Weekly Jump as U.S.-Iran Tensions Mount


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil prices edged higher in early Friday (8/21) morning trade 
and were on track for the second consecutive weekly increase on the back of 
rising tensions between the U.S. and Iran and slowing oil flows from the Middle 
East.

   By 08:02am ET, ICE Brent for October delivery rose $0.21 to $93.99 bbl, and 
NYMEX WTI for October delivery advanced $0.13 to $86.96 bbl.

   Downstream, the increase was more pronounced, with NYMEX ULSD futures for 
September delivery rising $0.0399 to $4.5202 gallon, and front-month RBOB 
futures appreciating by $0.0628 to $3.3257 gallon.

   The US dollar index continued lower, down 0.218 points to a three-month low 
98.595 against a basket of foreign currencies.

   Crude benchmarks rose to the highest in more than three weeks on slimming 
prospects of an easing oil supply disruption after Tehran and Washington 
adopted a more confrontational stance following the expiry of the official 
60-day ceasefire on Monday (8/17). Iran stepped up attacks on commercial ships 
trying to traverse the Strait of Hormuz outside of Tehran-approved corridors, 
leading daily crossings of the energy chokepoint back into the single digits, 
compared to the ante bellum average of 130.

   Iran-aligned Houthis also launched fresh attacks from Yemen on Saudi energy 
infrastructure outside of the Persian Gulf this week, raising concerns over the 
substantial crude oil flows that Saudi Arbia had during the nearly six-month 
long crisis successfully diverted to ports outside of Iran's reach.

   The latest escalation in the conflict came in the form of a mid-week U.S. 
announcement to impose harsh economic sanctions on Iran. U.S. President Donald 
Trump on Wednesday in a social media post declared "economic warfare and 
isolation" against the country, and threatened countries continuing to trade 
with Iran with severe economic consequences. Tehran on Friday warned against 
such a step, saying that their response would be "crushing, punishing and 
devastating". U.S. Treasury secretary Scott Bessent said that he would share 
details about the planned sanctions package on Monday (8/24).

   Intensifying Ukrainian attacks on Russian refineries, meanwhile, have over 
the past months also contributed to the global fuel supply tightness. Analysts 
estimate that the strikes have temporarily disabled anywhere from 20 to 40% of 
the country's refining capacity, sparking fuel shortages and export bans from 
an important global diesel supplier, and leading to a rally in diesel prices 
which dwarfed the rise in underlying crude oil futures.

    




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