(Bloomberg) — Brent oil swung after rallying more than 20% this month, as traders weighed threats to maritime traffic from the Strait of Hormuz and the Red Sea to a key Kazakh export terminal on Russia’s coast.
The global benchmark traded around $89 a barrel, fluctuating between small gains and losses. The US conducted a 10th straight day of strikes on Iran after President Donald Trump vowed Tehran “will pay” for killing American soldiers. In a sign of continued Iranian attempts to strike tankers crossing Hormuz, another ship carrying oil products was hit.
Meanwhile, Yemen’s Houthi militants threatened to blockade Saudi Arabia’s maritime traffic in the Red Sea, adding another level of risk to supplies from the top OPEC producer. The Red Sea route has allowed the kingdom to export millions of barrels of crude via a cross-country pipeline that bypasses the Strait of Hormuz.
Away from the Middle East, there have also been disruptions at the Caspian Pipeline Consortium terminal on Russia’s Black Sea coast, which ships most of Kazakhstan’s oil. Kazakhstan has at times shipped close to 1.8 million barrels a day of crude, making it a significant global exporter.
Oil has repeatedly swung on the prospects for escalation and détente in the conflict, making for increasingly choppy price moves. The Houthi threat could open up a new front in the conflict, dragging prices higher just weeks after oil markets looked to have averted the worst-case impacts of the Iran war.
“If there’s a disruption in the infrastructure, particularly the shipping lanes, then that could cause a spike in oil prices,” said Rob Thummel, senior portfolio manager at Tortoise Capital LLC, referring to the Houthi threat. “Inventories have drawn down a bit, so there’s just not a lot of margin for error.”
Saudi Arabia has ramped up exports from Yanbu, its key Red Sea export hub, and roughly 2.5 million barrels a day are at risk from Houthi attacks, Jorge Leon, senior vice president and head of geopolitical analysis at Rystad Energy AS, said in a note. The Saudi Foreign Ministry said it would take all necessary measures to protect its ships in accordance with international law.
Brent could exceed $120 a barrel by the fourth quarter if Hormuz disruptions persist, according to Goldman Sachs Group Inc., although that’s not the bank’s base case. At present, Goldman sees $80 in the final three months of the year, with the Houthi threat adding to upside risks to the forecast.
Visible traffic through Hormuz came to a near standstill on Monday following Iranian attacks on vessels over the weekend. An oil supertanker called the Acheloos and a smaller fuel tanker were both struck in the waterway, according to Dynacom Tankers Management Ltd., the ships’ manager.
The flare-up in violence around the waterway has prompted some shipowners to offer huge bonuses to get crews to sail through Hormuz. Sinokor Group, the world’s largest owner of supertankers, has offered six months’ extra salary if seafarers make a return voyage.
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–With assistance from Gabriel Levin, Nicholas Lua and Weilun Soon.
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