Oil Rebounds as Focus Returns to the Strait of Hormuz

Oil prices strengthened during Wednesday’s trading (November 11), recovering from a two-month low. Brent crude is now trading at US$92.03 per barrel, while WTI stands at US$86.72 per barrel, amid a tug-of-war between hopes for a de-escalation in the US-Iran conflict and an uptick in attacks on vessels in the Strait of Hormuz.

Attacks on shipping lanes have once again captured market attention following reports of several incidents. Data indicates that there were 37 attacks on vessels throughout October—the highest monthly figure since the conflict in the Middle East began. This situation has led investors to continue factoring in the risk of disruptions to oil flows through this strategic waterway.

Meanwhile, the outlook for US-Iran diplomacy remains a critical factor for the direction of oil prices. Even if an agreement is reached, the restoration of oil flows through the Strait of Hormuz would not be immediate; significant challenges remain, including the need for mine clearance, rising insurance costs, and the willingness of shipowners to resume transit through the area.

Supply-side factors are also exerting pressure on oil prices. Data from the American Petroleum Institute shows that US crude oil inventories rose by approximately 9 million barrels for the week ending November 6. Concurrently, Russia’s oil refining capacity is reported to have fallen by about 30% since late October, following drone attacks by Ukraine.

Newsmaker Analysis: Oil prices remain caught between hopes for an end to the conflict and the risk of supply disruptions. As long as attacks around the Strait of Hormuz persist, a geopolitical risk premium is likely to continue supporting prices. However, should diplomatic efforts between the US and Iran yield an agreement—leading to a normalization of oil flows—pressures stemming from an oversupply could once again cap gains in oil prices. (srh)

Source: Newsmaker.id