Crude pulled back Tuesday as talk of potential diplomatic progress between Washington and Tehran met a backdrop of worsening security at sea. The November WTI contract, set to roll off Tuesday, traded down 0.9% at 102.75 dollars after touching 110.48 earlier. A delayed WTI screen showed 102.70, down 0.96 or 0.93%, at 11:51 AM EDT.
Further out on the curve, WTI's December futures were 1% lower at 97.50 dollars. Brent's December delivery eased 1% to 108.31 dollars after reaching 111.99 intraday.
Security risks around the Strait of Hormuz have intensified in recent weeks. Ship-tracking firm Kpler said at least 18 commercial vessels have come under fire in the past two weeks. Iranian state-affiliated Tasnim reported the Revolutionary Guard Corps said two "non-compliant" oil tankers in the strait caught fire after striking mines placed by its naval unit.
Earlier this month, President Donald Trump stated that no U.S. military action against Iran would occur prior to the Nov. 3 midterm elections.
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Tamas Varga at PVM Oil Associates told CNBC the front end of WTI firming ahead of expiry signals tight global supply. He said, "It is a reflection of falling export volumes from the Middle East as tanker attacks and Houthi strikes on Saudi oil infrastructure intensify." He added, "Secondly, the U.S. decision to exempt Russian shadow fleet from sanctions will push freight rates possibly lower, which was a prohibitive factor to increase demand for U.S.-sourced crude." With that, he said, "U.S. crude oil grades are back in play as replacements of Mideast crude oil," at least for now, and noted, "Thirdly, U.S. commercial oil stocks are expected to have declined last week."
The bottom line: supply tightness meets geopolitical risk, so crude stays twitchy to headlines and shipping costs. That can ripple into energy equities and transport-sensitive names in your portfolio.
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