Brent crude climbed to $110.70 a barrel on Monday, its highest since May 20, after a fresh wave of attacks on Gulf shipping. The move extends a rally that has pushed energy prices up 20.4% year over year and left US drivers paying $4.33 a gallon for regular gasoline, according to AAA.
The attacks have rattled a market already tight on supply. US Energy Secretary Chris Wright said Gulf oil flows have recovered to about 80% of prewar levels. Iran, meanwhile, vowed to control the Strait of Hormuz, the chokepoint through which a large share of seaborne crude moves.
18 Attacks in Two Weeks
Kpler counted 18 reported ship attacks over a two-week span. A confirmed strike on Oct. 14 hit Aramco's headquarters, and the Houthis have claimed further attacks. The violence isn't confined to the Gulf: a Ukrainian strike knocked out a crude unit at the Ryazan refinery, removing refining capacity from the market.
Those disruptions come against a thin inventory backdrop. Onshore oil stocks sit at their lowest since at least 2016, according to the International Energy Agency. Diesel topped $200 a barrel in September, nearly double the price of crude, a sign that refining and transport bottlenecks are amplifying the crude rally.
OPEC+ Holds the Line
OPEC+ kept its November output targets unchanged, offering no additional barrels to cool the market. ING said oil prices remain well-supported and that the market is pricing in a significant risk premium given the situation's volatility.
The supply picture is doing little to ease pressure. With inventories low and output policy static, each new attack feeds directly into the price. Goldman Sachs estimates about $25 of Brent's current price is war premium and forecasts $90 by December, implying the bank expects some of that risk to fade.
Chart Shows a Fresh High
Brent has respected a rising trendline since early July and printed a fresh higher high, clearing the 0.786 Fibonacci level at $108.94. The Relative Strength Index reads 66, below the overbought threshold, suggesting momentum has room before it becomes stretched.
In a correction, the 0.618 Fibonacci level near $100.64 and the trendline form first support. That puts the $100 area as the level to watch if the risk premium starts to unwind.
Pump Prices Meet the Midterms
US consumer inflation reached 3.7% in September, according to the Bureau of Labor Statistics, with energy prices alone up 20.4% year over year. Traders now expect another rate hike in December, a bet that higher energy costs are feeding through to broader prices.
The stock market has already rewarded the move. The S&P 500 energy sector gained 51% this year through Oct. 14, according to Opening Bell Daily data, while the broad index rose about 13% over the same period.
With US midterms next month, pump prices are a political test as much as an economic one. Not everyone expects further gains. June Goh, senior oil market analyst at Sparta Commodities, sees Brent rangebound around $100, saying the markets seem unwilling to absorb higher prices with the rest of the economy not looking rosy.
OPEC+'s next scheduled meeting and the December rate decision will be the next markers for traders. Until then, the Strait of Hormuz and the pace of attacks on Gulf shipping remain the swing factors for a market already pricing in a hefty war premium.
