(Bloomberg) — Oil extended its rally on Thursday, with Brent crude settling near $108/bbl and West Texas Intermediate climbing above $104 as escalating Middle East hostilities intensified concerns over global crude supplies.
WTI rose above $104 after surging almost 7% in the previous session, while Brent settled near $108, its highest level in nearly four months. Brent has now gained almost 80% this year, although it remains below the wartime peak of just above $126 reached in April.
The latest gains come as fighting across the Middle East intensifies, including U.S. strikes on Iranian oil tankers and Houthi attacks on Saudi energy facilities that have forced some operations to halt. Iran and the U.S. have also signaled that the conflict could continue, diminishing expectations for a near-term normalization of regional energy flows.
“Further attacks on fuel tankers and rhetoric suggest the conflict could extend longer than analysts had modeled,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group. “Trader chatter remains skeptical of the rally, but the reality is that both the expected timeline of the conflict and hopes for a significant normalization in Gulf flows are being pushed out.”
Oil prices are also finding support from a recent pickup in Chinese crude purchases, adding pressure to an already tight market.
Supply concerns have been compounded by lower Saudi Arabian output. The kingdom said its oil production fell again last month to its lowest level since 1990.
Before the Iran war, roughly one-fifth of global oil and LNG supplies moved through the Strait of Hormuz. Continued uncertainty over Middle East energy flows has helped push crude sharply higher, while European natural gas and refined products including diesel have also rallied.
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