International oil prices held near five-month highs on October 20, as Iran's stance on controlling the Strait of Hormuz and a fresh round of Houthi attacks on Saudi energy facilities renewed uncertainty over the recovery of Persian Gulf oil supply.
As of 13:40 Beijing time, Brent crude futures rose 0.4% to $109.97 per barrel, while the more actively traded December WTI crude futures rose 0.3% to $98.80. Brent touched $110.70 in the previous session, its highest level since May 20, and has gained nearly 80% so far this year.
Although the U.S. energy secretary said crude shipments from the Persian Gulf have recovered to about 80% of pre-war levels, the latest attacks could slow the pace of supply recovery.
Iran repeats its claim to control the Strait of Hormuz, and a tanker hitting a mine deepens shipping concerns
Iran's First Vice President Mohammad Reza Aref said during a meeting with Russian Prime Minister Mikhail Mishustin in Tajikistan that Iran has no choice but to strengthen its control over the Strait of Hormuz in order to safeguard national security. He said the United States should bear responsibility for the current crisis and its consequences, while also saying Iran can ensure safe passage for vessels from friendly countries.
At the same time, Iran's Islamic Revolutionary Guard Corps claimed that an oil tanker caught fire after hitting a mine in the Strait of Hormuz. The incident has not been independently verified. Reports said the vessel was alleged to have used an unauthorized route, but it remains unclear whether the incident is related to the U.S.-backed shipping corridor along the coast of Oman.
Shipping safety in the Strait of Hormuz remains a major factor affecting international oil prices. Iran's latest remarks on control of the strait and conditions for vessel passage, combined with the news of the tanker hitting a mine, have once again increased market concerns about the stability of energy transportation in the Persian Gulf.
Houthis claim attacks on Saudi oil fields and refining facilities, threatening the supply recovery process
Yemen's Houthi movement recently claimed it carried out attacks on multiple energy, military and transportation infrastructure targets in Saudi Arabia, including Saudi Aramco facilities in Yanbu, the Shaybah oil field, Riyadh's King Khalid International Airport and Abha Airport. The claims have further heightened market concerns about the safety of Saudi energy production and transportation facilities.
Before that, crude shipments from the Persian Gulf had recovered markedly. U.S. Energy Secretary Chris Wright said crude transportation in the Persian Gulf has recovered to about 80% of pre-war levels, but refined product shipments are still restricted, meaning the recovery in supplies of gasoline, diesel and jet fuel is lagging.
ANZ analysts noted that the momentum of recovering Persian Gulf crude shipments strengthened noticeably in the second week of October, but with recent attacks intensifying, that process is facing new threats. Preliminary data suggest related shipping activity may slow again. The bank believes that although improved crude supply had eased some market pressure, continued military attacks could limit a further recovery in Persian Gulf energy exports.
Trump considers easing restrictions on Russian energy, but Russia has limited room to raise output
On the other hand, U.S. adjustments to restrictions on Russian energy could increase global fuel supply to some extent. U.S. President Donald Trump recently signed an executive order involving exemptions from some Russia-related sanctions and tariff measures, but the government has not yet made a final decision on the policy.
If restrictions on Russian energy exports are further eased, some oil and refined product supply could re-enter the international market, helping to ease pressure caused by disruptions in Middle East supply. However, Russia's own crude output has not yet returned to year-earlier levels, limiting its ability to fill the Persian Gulf supply gap.
Data show that Russia's oil production rose slightly in September but remained significantly below the same period last year. Even if export restrictions are loosened, the scale of supply Russia can add in the short term remains limited.
At present, the international crude oil market is being affected by two forces at the same time: on one hand, the gradual recovery of Persian Gulf crude shipments and the possibility that the United States may ease restrictions on Russian energy provide support for improved supply; on the other hand, Iran's continued control over passage through the Strait of Hormuz, Houthi attacks on Saudi energy facilities and the slow recovery of refined product shipments still pose threats to supply.
As Brent crude approaches $110 per barrel, the market will continue to focus on actual Persian Gulf export volumes and the operation of Saudi energy facilities.
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