Oil futures: Crude higher after Iran seizes disputed vessel off Oman
Quantum Commodity Intelligence – Crude oil futures Thursday were higher on reports of a major shipping incident off the coast of Oman, in which a crude oil tanker was seized by Iranian forces, although benchmarks struggled to hold the initial gains.
Front-month Mar24 ICE Brent futures were trading at $77.55/b (1910 GMT), compared to the day's range of $76.66-$79.10/b and Wednesday's settle of $76.80/b.
At the same time Feb24 NYMEX WTI was trading $72.18/b versus Wednesday's settle of $71.37/b, having traded in a $71.17-$73.81/b range.
Reports of an 'incident' off the coast of Oman early Thursday put the market on alert, lifting prices with any escalation of the Middle East conflict potentially threatening regional stability and oil flows.
Suspicion immediately fell on Iran amid reports of a vessel hijacking, but events took a twist with the ship reported to be the renamed Suez Rajan, which was at the centre of a dispute between the US and Iran after it was seized by US authorities in 2023 on suspicion of shipping sanctioned Iranian oil to China.
Before Wednesday's EIA release, markets had been climbing higher amid escalating tensions in the Middle East, but the rally was derailed for a second week by a sharp build in US inventories.
"Oil prices experienced a reversal lower following an initial-session uptick, facing notable selling pressure as the EIA reported substantial builds in US crude and refined fuel stockpiles during the first week of 2024," said Stephen Innes, managing partner SPI Asset Management.
"Despite this downturn, the weaker Dollar Index and concerns regarding a broader escalation in the Middle East are expected to support the oil market," added Innes.
While EIA data revealed an unexpected build in crude stocks, most of the damage was inflicted by the products sector, with large inventory builds for a second week.
Products
US gasoline stocks soared by another 8 million barrels in the first week of January – adding to the previous week's 30-year high 11 million barrel build – even as demand rebounded from the post-Christmas holiday slump and net exports ticked higher.
It pushed inventories to a ten-month high of 245 million barrels as of 5 January, according to Wednesday's EIA data, up 3.4% on the week and 8% higher than a year earlier.
On a more positive note for prices, demand jumped 5% from the post-Christmas slump the week before to 8.3 million bpd – up around 10% on the same time last year.
Adding to the downturn, US distillate stocks touched a near 2.5-year high at the start of 2024 as exports tumbled, while demand remained muted as distillate inventories grew for a seventh straight week to reach 132.4 million barrels.
But in broader terms, oil benchmarks have been in a downtrend since the middle of October. Despite several attempts to rebound in 2024, prices have struggled to establish a clear trend amid conflicting price signals at the start of the year.
"The crude oil market is showing signs of settling into a relatively narrow range, as the tug-of-war between demand and supply concerns continue to create choppy but overall directionless price action," said Ole S Hansen, Head of Commodity Strategy at Saxo Group.
"Overall, we see an increased likelihood of this rangebound trading behaviour continuing in the coming months with no single trigger being strong enough to change the dynamics of a market," added Hansen.
Investors Thursday will look for any signals on US rate policy this year as the US December inflation report is scheduled later in the day, with a consensus view for a 0.2% monthly CPI and 3.2% on a yearly basis.
