Crude oil closed out its most volatile week since mid-summer with its biggest weekly gain since July, as renewed fighting between the United States and Iran kept the Strait of Hormuz effectively closed to commercial shipping. West Texas Intermediate settled at $91.48 a barrel on Friday, up 0.2% on the day, while Brent crude rose 0.8% to $96.28, according to Rigzone. For the week, oil gained roughly 9.7%.
The rally was driven almost entirely by the seventh month of the U.S.-Iran conflict, which flared again this week with the first direct military exchanges between the two countries in more than a month. Traffic through Hormuz — the chokepoint through which roughly a fifth of global oil supply normally transits — has collapsed to a handful of tracked vessels a day, down from around 85 in normal times, with much of the remaining crude moving aboard tankers that have switched off their transponders to avoid detection.
Tanker Giant Sees No Recovery This Year
Mitsui O.S.K. Lines, Japan's largest tanker operator, said this week it no longer expects a return to normal Hormuz operations before the end of the year — a sharp reversal from its earlier assumption of a phased resumption starting in October, according to OilPrice.com.
Given the current situation, it's difficult to see operations resuming in any form by the end of the year.
Jotaro Tamura, chief executive, Mitsui O.S.K. Lines
Tamura added that the company will not send ships back through the strait without both de-escalation and guarantees of safe passage. Saudi Arabia's observed crude exports last month slumped to their lowest level in at least nine years as tankers came under attack.
The disruption has hit refined products even harder than crude. U.S. retail diesel prices have climbed to a record $5.85 a gallon on average, according to AAA data cited by Yahoo Finance, as the Hormuz standoff combines with Ukrainian strikes on Russian refineries to squeeze already-thin European diesel stockpiles. Some of the week's gains were offset late Friday by reports of progress toward ending the separate Russia-Ukraine war, which briefly eased fears of further refinery strikes.
For now, traders are treating Hormuz as a chokepoint that may stay effectively shut through the winter heating season, a scenario that would keep upward pressure on both crude and diesel prices well beyond the current conflict's next headline.
SOURCES — Rigzone — Oil Holds Gains · OilPrice.com — Hormuz Disruptions Could Drag Into Next Year, Japanese Tanker Giant Warns · Yahoo Finance — Oil Heads for Steepest Weekly Gain, Diesel Hits Record High
