SEATTLE (Oil Monster): Oil prices rebounded on Wednesday from two-month lows as continued attacks on shipping around the Strait of Hormuz offset hopes that the U.S.-Iran conflict could move toward de-escalation.
Brent crude futures rose about 1.4% to $92.81 a barrel on Wednesday, while U.S. West Texas Intermediate crude gained around 1.3% to $87.12.
The rebound followed Tuesday's decline to two-month lows as traders continued weighing the possibility of diplomatic progress with Iran against persistent threats to shipping through the Strait of Hormuz.
Reuters reported that 37 vessels were attacked in the Strait of Hormuz and surrounding waterways during October, the highest monthly total since the conflict began, with another 10 attacks recorded so far in November.
Recent incidents include tankers struck near Oman and vessels reported on fire while transiting the waterway.
UK Maritime Trade Operations reported another tanker attack on November 10 about 19 nautical miles northeast of Lima, Oman. The vessel was struck by an unknown projectile, although the crew was reported safe.
Also Read:
A political agreement would not immediately restore normal oil flows through Hormuz. Mine clearance, elevated insurance costs and shipowner willingness to transit the waterway would still affect how quickly volumes recover. That is why crude can remain supported even while traders price in a lower probability of further military escalation.
Oil prices had fallen sharply earlier in the week as U.S. officials played down the need for further military strikes against Iran.
Those expectations weakened after an Iranian security official said no talks were currently taking place between the two sides, reminding traders that a final agreement remains uncertain.
U.S. crude inventories rose by 9 million barrels in the week ended November 6, according to market sources citing preliminary American Petroleum Institute data.
The inventory increase provides a counterweight to the geopolitical support coming from the Strait of Hormuz.
Official U.S. inventory data from the Energy Information Administration will provide a clearer picture of domestic supply conditions.
Oil markets are also monitoring renewed attacks on Russian refining infrastructure.
Reuters reported that Ukrainian strikes since late October have disrupted nine major Russian refineries representing roughly 30% of the country's installed refining capacity.
Related Coverage: Ukraine Strikes Hit 30% of Russia's Refining Capacity
The next major test is whether U.S.-Iran diplomacy produces a durable agreement and whether vessel attacks around Hormuz begin to decline.
Even if political tensions ease, shipping conditions will remain critical because mine clearance, freight costs and insurance requirements could delay a full normalization of Gulf crude flows.
Courtesy: www.reuters.com
