Brent tops $93 on fifth straight up day as US tightens Iran blockade
Crude has climbed five days running. Brent hit $93.48 early Thursday, a three-week high, up 1.95%, and WTI crossed $85 to trade near $86.12, up about 2%. That is more than $2 a barrel added on the day, on top of four sessions of gains. For any jobber or hauler buying downstream, the cost floor under diesel and gasoline just moved up again.
The driver is risk, not a dry terminal. Trump on Aug. 19 threatened to widen economic pressure on Iran without giving details, ballistic missile fire in the UAE set off nationwide warnings, and the US has reinstated its blockade in the Gulf of Oman aimed at stopping Iranian exports. The September Nymex WTI contract expires this week, which adds noise to the move.
The barrels are still flowing
Physical crude is not short right now. ADNOC issued its ninth spot tender since June, offering Upper Zakum, Umm Lulu and Das grades for October and November loading as the UAE pushes exports higher. Saudi June crude exports climbed from a record May low. US crude stocks posted another build. Bob McNally of Rapidan Energy told CNBC the blockade has already fenced Iran out, making its volumes irrelevant to global balances. So most of this run-up is a Strait of Hormuz premium sitting on top of a market that is still well supplied. That premium could come off fast if the strait stays open.
Tanker rates
Very large crude carriers topped $130 million apiece in the second quarter, a record, and one-year charter rates hit their highest on record, per Braemar data cited by the FT. Middle East producers are paying to control physical tonnage. Higher freight feeds straight into landed crude cost for US Gulf and East Coast refiners pulling barrels across the water, and it shows up in the crack before it shows up at the rack.
Russian refining hit
Ukrainian drone strikes hit one of Russia's largest refineries, with deaths reported, and Russia's fuel shortage has now spread into Central Asia, where Tajikistan is buying from Iran. The FT says Western refinery closures look set to continue despite the war. Orlen locked in nearly 25% of its crude feedstock from Equinor. Less refining capacity globally tends to keep product margins firmer even when crude eases.
What to watch
Whether Hormuz stays open, which is most of the premium. The next EIA inventory print after another build. September WTI expiration this week. And any real substance behind Trump's threat, which so far is words. Crude could soften if the Gulf sees no new escalation and OPEC barrels keep loading.