Oil prices rose on Monday after the United States and Iran exchanged attacks for the first time in a month, pushing the global benchmark for crude back above $90 a barrel, after a sharp fall last week.
The U.S. military said its forces attacked two Iranian rocket launchers trying to disperse sea mines in the Strait of Hormuz. In response, Iran said it fired missiles at American air bases in Jordan, which the Jordanian military said it had intercepted.
Oil prices jump.
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The price of Brent crude, the global benchmark for oil, was up over 3 percent to about $91 a barrel.
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West Texas Intermediate crude, the U.S. benchmark, was also higher at around $86 a barrel. On Sunday, President Trump said that he would use the oil from an unusual deal in Venezuela to refill the U.S. national stockpile of oil, but it could take years to produce meaningful amounts of oil under the agreement. The U.S. Strategic Petroleum Reserve now sits at its lowest level since 1982.
Shipping in the Strait of Hormuz is still snarled.
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Over the past week, about 15 ships per day on average passed through the Strait of Hormuz, according to Kpler, a maritime data company. Before the war, more than 130 ships a day transited the vital waterway between Iran and Oman, which carried one-fifth of the world’s oil and a large amount of gas before the war.
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U.S. Energy Secretary Chris Wright said this month that eight million barrels of oil a day are being exported from the Persian Gulf, though many independent analysts say the number is lower. TankerTrackers.com, a maritime tracking firm that uses vessel data and satellite imagery, determined that some 5.2 million barrels of crude oil a day passed through the strait on average over the past 28 days, Samir Madani, the firm’s co-founder said on Monday. Before the war began, nearly 15 million barrels of oil a day were sent through the strait.
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Even as the Trump administration is urging ships to transit, attacks on vessels continue. On Saturday, a tanker was hit off the coast of Oman, according to the U.K. Maritime Trade Operations center, which is run by Britain’s Royal Navy. The ship was struck by “an unknown projectile” while transiting inbound in the Strait of Hormuz, though no casualties were reported, the agency said. There have been more than 72 attacks on ships since the start of the war.
Stocks fall and bond yields remain elevated.
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The S&P 500 fell slightly when stocks began trading in the United States on Monday. The index has risen four of the past five weeks.
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Stocks in Asia were mixed. Benchmark indexes in Japan and Hong Kong fell slightly, while stocks in South Korea posted a small gain. In Europe, the Stoxx 600, a broad index that tracks the region’s largest companies, traded flat.
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U.S. government bond yields on the 10-year Treasury rose to 4.75 percent early Monday, with borrowing costs remaining near multi-decade highs. Yields jumped at the end of last week, when Kevin M. Warsh, the Federal Reserve chairman, signaled a readiness to raise interest rates if inflation did not moderate.
Gasoline prices are steady.
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The national average for gas prices was flat on Monday at $4.08 a gallon, according to the AAA motor club. The price has risen 37 percent since the war began.
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Gas prices don’t move in lock step with crude, usually trailing increases or drops by a few days.
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The average price of diesel was unchanged on Monday at $5.60. It is up 49 percent since the start of the war.
What they are saying: Refineries’ profit margins to remain ‘higher for longer.’
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The prices of refined products like gasoline and diesel have risen much more steeply than the cost of crude oil. That is partly because exports of crude oil from the Gulf are running at up to 80 percent of prewar levels, according to a research note by analysts from Goldman Sachs, but refined product exports from the region are languishing around 40 percent of prewar activity. Attacks on energy facilities in Ukraine and Russia have also crimped the global supply of refined fuels.
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Goldman’s analysts forecast that refinery activity is not expected to return to “seasonal norms” until the second half of next year. The average profit margin on diesel and jet fuel is three times higher what it was a year ago, the analysts estimated, versus a gain of “only” about 30 percent for crude oil. That has encouraged refineries to run at full tilt, and for operators to add capacity. But over the next year or so, that activity “would not be enough to offset likely persistently elevated outages, keeping product margins higher for longer,” the note said.
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