Oil prices are heading for a weekly gain of more than 6% after the United States and Iran resumed military exchanges in the seventh month of their conflict. U.S. diesel prices hit a record high as the fighting and Ukrainian strikes on Russian refineries deepen supply disruptions. Citi and ANZ have both raised their Brent price forecasts as the standoff drags on.
Oil prices are set for a weekly gain of more than 6% after the United States and Iran resumed military exchanges in the seventh month of their conflict, while U.S. diesel prices hit a record high. Brent crude futures rose 6.1% for the week, and West Texas Intermediate crude gained 8.3%. Both contracts eased on the day, with Brent slipping 75 cents, or 0.79%, to $94.77 a barrel by 1230 GMT. WTI fell 95 cents, or 1.04%, to $90.35 over the same window.
Diesel squeeze stokes inflation warnings
The rally in oil, combined with a steeper rise in fuel prices, has pushed inflation and government borrowing costs higher around the world and intensified warnings that the global economy could face a hard landing. Rystad Energy chief economist Claudio Galimberti said diesel touches every part of the economy, calling it one reason U.S. government bond yields have climbed on expectations that inflation will keep rising. Average U.S. diesel prices reached record highs as the renewed hostilities and Ukrainian attacks on Russian refineries deepened supply disruptions.
Fighting escalates as Hormuz traffic dries up
Washington says Middle Eastern crude oil flows have returned to near-normal levels in recent weeks, but analysts and tanker trackers say flows remain seriously disrupted. Just four commodity vessels transited the Strait of Hormuz on Thursday, well below the 10-day average of about 15, preliminary shipping data showed. Iraq increased its August oil exports to about 2.34 million barrels per day from roughly 1.35 million bpd in July, two Iraqi energy officials said.
This week's U.S. attacks killed and wounded dozens of people, including Iranian civilians, in the fiercest clashes between the two countries since July. Israeli Defence Minister Israel Katz renewed warnings that Israel would "cripple" Iran's military and civilian infrastructure, including energy facilities, if Tehran struck back. Three senior Iranian sources said Washington's campaign to blockade Iran's oil exports and choke off sanctions evasion is growing increasingly difficult to sustain.
Forecasts climb as standoff drags on
Analysts expect prices to stay elevated. KCM Trade chief market analyst Tim Waterer said the combination of renewed U.S.-Iran hostilities and uncertainty around the Strait of Hormuz has been enough to reprice risk higher. Citi raised its average Brent price forecast for Q3 to $86 a barrel from $80, saying the strait's reopening is taking longer than expected. ANZ analysts also lifted their Brent forecast, to $95 a barrel in the short term, with upside risk if the conflict intensifies.
Source: Commodities & Futures News
Trading involves risk.
Risk Disclaimer
