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Morning Oil Outlook. Iran Strike Talk and a Hurricane Push Brent Past $104

Jeff Showalter

— 2 min read
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Morning Oil Outlook. Iran Strike Talk and a Hurricane Push Brent Past $104
Photo by NASA / Unsplash

Oil is up more than 4% this morning, and it had two reasons to jump. Reports say Washington is getting ready for a possible return to “major combat operations” against Iran. At the same time, Hurricane Isaias has knocked a quarter of Gulf of Mexico output offline.

Earlier this week, the market looked like it was settling down. Not anymore.

What Happened Overnight

On Wednesday, U.S. media reported that the Pentagon told Central Command to finish preparations for a possible return to major combat against Iran. No date has been set. Targets could include Iranian energy, infrastructure and nuclear sites. An Israeli official told Axios the odds of an attack before next month’s midterms are “not high but we don’t rule it out.” That isn’t a promise of strikes, but it’s enough to make traders nervous.

Then there’s the storm. As of Wednesday, producers had shut in 511,619 barrels a day, or 25.08% of Gulf production, according to the Marine Minerals Administration. Forecasters expect Isaias to come ashore near Mississippi, Alabama or northwest Florida late Friday or early Saturday.

Where Oil Stands

  • Brent (the global benchmark): $104.59, up $4.39 (4.38%), after settling Wednesday at $100.20
  • WTI (West Texas Intermediate, the U.S. benchmark): $92.27, up $3.99 (4.52%), after settling Wednesday at $88.28
  • U.S. regular gasoline, national average: $4.36 a gallon
  • U.S. commercial crude stocks: 424.134 million barrels as of Oct. 2, down about 3.2 million from the prior week

Brent briefly went over $105 in European trading, and stocks felt it. European markets opened lower on fresh inflation worries. The 10-year U.S. Treasury yield is sitting near 5.32%, close to a multi-decade high, and more expensive oil only adds to that pressure.

Supply Was Getting Better

That’s the frustrating part. Middle East exports had been climbing back toward pre-war levels. Saudi Arabia’s East-West pipeline can move up to 5.8 million barrels a day around Hormuz, and on Wednesday, IEA (International Energy Agency) members agreed to speed up emergency stock releases, starting with diesel.

None of that fixes Hormuz. Only seven commodity ships made it through the strait on Oct. 6, and Iran has been hitting more tankers there.

What to Watch

The storm’s path matters most right now. Earth Science Associates estimates Isaias could cost about 11.2 million barrels of Gulf output before it’s done, according to Reuters. Friday also brings the Baker Hughes rig count, a weekly tally of active drilling rigs. Still, a single headline from the White House on Iran could move prices more than any data release this week.

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