Brent crude tops $107 as Hormuz attacks escalate, deepening India's fuel worries
Global oil prices surged on Thursday, 10 September, with Brent crude climbing more than 6 per cent to above $107 a barrel, its highest level since May, after the United States and Iran traded attacks on shipping near the Strait of Hormuz. The spike adds to pressure on energy importers such as India, where cooking gas prices have already risen sharply this year, according to reports from Rigzone, Fortune and Foreign Exchanges.
Brent for November settlement rose 6.3 per cent to $107.63 a barrel, while US benchmark West Texas Intermediate gained 6.7 per cent to $102.48, closing above $102 for the first time since May, Rigzone reported citing Bloomberg data. Brent is now up more than 75 per cent for the year, though still below its wartime peak of $126 in April.
What triggered the jump
Iran said on 9 September that it had attacked ten vessels near the Strait of Hormuz after the United States sank five Iranian oil tankers, the largest attacks on shipping by either side since the war began six months ago, Khaosod English reported. Tanker traffic through the strait, which normally carries about a fifth of the world's oil, has slowed sharply, according to Fortune.
Rigzone reported that Saudi Arabian crude production is at its lowest since 1990 as Houthi forces in Yemen target Saudi energy facilities, and that the Houthi advance on the Red Sea port of Mokha has raised concerns about the Bab el-Mandeb strait as well.
"Crude is trading at its highest levels since May as the market reprices both the escalation and duration of risk," Rebecca Babin, senior energy trader at CIBC Private Wealth Group, told Bloomberg.
Diesel is the bigger problem
Analysts say the squeeze is most acute in refined products. US retail diesel reached a record above $5.94 a gallon and diesel futures exceeded $5 a gallon for the first time since April 2022, according to Fortune and Rigzone. Dan Pickering of Pickering Energy Partners told Fortune that "folks are paying attention to $100 oil, but they really ought to be paying attention to $200 diesel". Susan Bell of Rystad Energy said global stocks of diesel, petrol and jet fuel had drawn down to "critical low levels".
The Indian angle
India imports the bulk of its crude and a large share of its liquefied petroleum gas, much of it through the Gulf. Foreign Exchanges reported that standard LPG cylinder prices have risen to between Rs 850 and Rs 950 as subsidy cuts have coincided with Hormuz disruptions, leaving many low-income households struggling to afford cooking fuel. Fortune reported that fuel shortages, particularly diesel, are expected to become more prevalent in parts of South Asia heading into the autumn and winter.
Higher crude also widens India's import bill and puts pressure on the rupee and on inflation, at a time when domestic petrol and diesel prices are administered by state-run oil marketing companies.
What happens next
Traders are watching whether the attacks around Hormuz continue and whether Iran follows through on its statements about intensifying the conflict. In India, attention will turn to whether oil marketing companies pass on higher costs at the pump and whether the government revisits LPG subsidies ahead of the festival season.