Brent climbs after tanker attack

Oil prices rose sharply on Friday after an attack on a tanker in the Strait of Hormuz renewed fears of disruption to Middle East energy supplies. Reuters reported that Brent crude futures for December, which expired on Friday, were up about 2% at $117.14 a barrel by 1236 GMT, after touching $118 during the session. US West Texas Intermediate (WTI) crude rose about 1.9% to $103.94 a barrel. The rally followed a UKMTO report that a small boat had attached two explosive devices to an outbound tanker about 25 nautical miles north-east of Khasab, Oman, starting an engine-room fire. The crew was reported safe and the vessel later resumed its voyage, but the incident was enough to push traders back towards the risk of wider shipping disruption. European natural gas in Amsterdam also climbed back above $100 per megawatt-hour, according to market reports.

Fourth monthly gain in a row

Friday's rise put both benchmarks on course for a fourth consecutive monthly gain. Reuters reported Brent was heading for a gain of about 13% in October, with WTI heading for about 15%. Since the end of June, Brent has gained more than $40 a barrel, reflecting a large geopolitical premium built up since the US-Israeli war with Iran began in February. Analysts caution against reading the headline December Brent price as the new long-term level. The more actively traded January Brent contract traded around $113, about $4 lower, because the December contract was expiring. That gap means the headline price will fall on Monday when January becomes the front contract, even if nothing changes in the underlying market.

What traders are watching next

Traders are braced for further volatility around two political dates: Israel's parliamentary election and the US midterm elections on 3 November. Reports this week said US military options against Iran had been briefed at the White House, but no decision to launch new strikes has been confirmed. A credible diplomatic breakthrough could unwind part of the risk premium, while another tanker attack or confirmed production disruption could push Brent towards $120. Until either happens, the market is pricing higher uncertainty rather than a proven cut in global oil supply.

Sources: Reuters via LSE | 360 Mozambique / Diário Económico