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Brent crude futures breached $100 a barrel on Wednesday for the first time since July 24 as escalating attacks in the Middle East, including on tankers, stifled hopes of a normalisation of oil shipping in the region.
The move brought futures prices into line with physical crude and fuel markets, where prices have already been trading above the psychological threshold.
Front-month Brent crude futures LCOc1 were up $2.74, or 2.8%, at $100.66 a barrel by 1315 GMT, after earlier touching $100.95. U.S. West Texas Intermediate crude CLc1 was up $2.74, or 3%, at $95.77 a barrel, its highest level since early June.
The contracts were headed for their biggest daily rises in percentage terms since September 1.
Since the Iran war began on February 28, Brent has surged as high as $126.41 a barrel, a peak reached on April 30.
"The move towards and back above $100 Brent is reflecting a market that increasingly has to change its view on how long the Middle East crisis will continue to curb supply from the region," said Ole Hansen, head of commodity strategy at Saxo Bank.
In a sharp escalation of the six-month-old war in recent days, US forces hit multiple Iranian oil tankers and Iran targeted a U.S. base in Jordan and attacked ships.
A seafarer was killed in an incident involving the Gibraltar-flagged oil products tanker Hercules Star while at anchorage off Dubai, the vessel’s charterer Peninsula said on Wednesday.
This week, attacks by Iran-backed Houthis on Saudi energy facilities have also set oil installations ablaze, threatening a significant expansion of the conflict.
The attacks threaten crude shipments via the Red Sea, which has been a key alternative route to the crucial Strait of Hormuz, where oil flows have been severely curtailed.
SUPPLY RISKS MOUNT
"Market participants appear to be pricing in a more prolonged conflict in the Middle East as well as the risk that the latest escalation in military strikes disrupts oil flows from the Middle East," said Hamad Hussain, senior climate and commodities economist at Capital Economics.
"The key risk is whether the recent attacks on oil tankers lead to fewer ship-to-ship transfers taking place in the Gulf of Oman, which have so far played a key role in providing oil to global markets and keeping a lid on prices."
A tanker carrying about 2 million barrels of Iraqi fuel oil was struck by a drone in Iraqi territorial waters on Wednesday, port officials said, while UKMTO, a British navy-linked agency, reported that several merchant vessels in the Gulf had been hit by disabling fire overnight.
In the week before a resumption in fighting on August 30, roughly 8 million to 9 million barrels per day had flowed through Hormuz, double the previous week's volume, according to Rystad Energy's Chief Economist Claudio Galimberti. More recently, flows have fallen below 2 million bpd.
Six commodity vessels passed through the strait on Tuesday, down from nine a day earlier and below the 10-day average of about 12, preliminary Kpler shipping data showed.
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