Crude oil declined in a volatile trading session, caught between an uptick in Iranian attacks on vessels in the Strait of Hormuz and the continued resilience of Middle Eastern oil shipments.
Brent crude settled slightly lower, hovering near $100 a barrel, while WTI dropped 1.3% to close around $88 a barrel.
Although oil flows through the Strait of Hormuz have increased in recent weeks, the UK Maritime Trade Operations agency said at least nine attacks have occurred in the waterway so far this month. That tally already equals half the combined number reported for the Strait of Hormuz and the Persian Gulf in September.
The Atlantic magazine, citing two government officials, reported that the White House has asked the Pentagon to draw up strike options against Iran that could be carried out before the US midterm elections. Oil prices edged higher in post-settlement trading following the news.
That report runs counter to the prevailing market view. Previously, the market widely assumed that US President Donald Trump would avoid escalating conflict before the elections in order to curb rising energy costs, since the cost of living is a key concern for voters.
Earlier rounds of Iranian attacks in the Strait of Hormuz had reduced oil shipments, though increased flows in subsequent days often offset those declines. Shell CEO Wael Sawan said at a forum this week that Middle Eastern oil shipments have recovered to about 80% of pre-conflict levels. However, the volume of refined products leaving the region remains far below normal.
European diesel futures rose as much as 6.8% on Wednesday, with the Iran conflict and Ukrainian strikes on Russian refineries combining to tighten market supply. "In my view, the market currently lacks a clear direction," said Ole Sloth Hansen, head of commodity strategy at Saxo Bank. "Middle East supply, especially crude supply, has recovered strongly. But since Iran is not participating in this incremental volume, the risk of attacks is rising."
Traders also had to contend with mixed US inventory data. US Energy Information Administration data showed crude stockpiles fell by 3.2 million barrels last week, even though inventories at the key Cushing storage hub in Oklahoma rose slightly for a third consecutive week. Total crude and refined product exports jumped to their highest level since late May, but a simultaneous surge in imports offset that bullish factor.
Traders are also watching the weather, with the season's first Atlantic hurricane expected to reach the US Gulf Coast on Friday, potentially bringing destructive winds, flooding and disruption to energy production.
WTI November futures fell 1.3% to $88.28 a barrel; Brent December futures dropped 0.4% to settle at $100.20 a barrel.
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