Escalation of Middle East conflict disrupts supply, Brent crude stabilizes above $100

⑴ Due to the increased risks to supply caused by escalating Middle East conflicts and attacks on oil tankers, both Brent and WTI crude oil futures rose by around $1 compared to the previous trading day’s closing price. On Thursday, international oil prices continued to climb, with Brent crude oil futures quoted at $102.32 per barrel, up 0.97%; WTI crude oil futures quoted at $97.81 per barrel, up 1.56%. ⑵ Since early August’s lows, oil prices have increased by nearly 28%. The US and Iran have failed to reach a permanent ceasefire agreement, and conflict flared up again in late August. Crude oil transport through the Strait of Hormuz remains far below pre-war levels; before the conflict, this route carried about one fifth of the world’s oil and gas shipments. ⑶ The pressure on the Red Sea market is also rising, as Iran-backed armed groups have increased their attacks on Saudi Arabia and have taken control of Mocha, located on the Yemeni Red Sea coast. ⑷ Market data shows that since September 3, spot Brent crude has consistently traded above $100; ING Group reported that China's demand for crude oil purchases has picked up in recent weeks, which is strengthening the spot crude oil market. ⑸ Institutional analysis points out that, should China’s crude oil imports stay strong, the price effect from supply disruptions will be magnified; if imports retreat, it will suppress further oil price rises. The crude oil supply and demand situation remains tight and is likely to support oil prices staying at high levels.