Perfect Storm(s) Upending Global Energy Sector with Oil on the Rise

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

The commodity sector faced a myriad of challenges on Thursday, from attacks in the Persian Gulf to the first hurricane of the Atlantic hurricane season. With global concerns on the inflationary consequences, oil prices jumped nearly 5% on Thursday.

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Declines in the Morning, Traders Take Warning

With U.S. crude oil inventories on the decline and renewed attacks on shipping lanes in and around the Persian Gulf, crude oil prices were rallying hard on Thursday.

The United Kingdom Maritime Trade Operations Center (UKMTO) reported Thursday that a tanker was hit by multiple projectiles about 51 nautical miles off the coast of Qatar.

"Casualties have been reported," the report read. "Authorities are investigating."

The report comes as the National Hurricane Center in Miami, Florida, warned of life-threatening storm surge along the Gulf Coast due to the upcoming Friday landfall of Hurricane Isaias. Industrial Info Resources has been following the storm since it developed off the eastern coast of Mexico earlier this week.

"Operators have already begun precautionary evacuations," a report from Wednesday read. "BP, Shell and Chevron are removing non-essential personnel from their Gulf platforms.

As of Thursday afternoon, the U.S. federal government reported that 63% of offshore crude oil production, or around 1.2 million barrels of oil per day (bpd) were shut-in because of the storm. Some 57% of the natural gas, or 1.1 billion cubic feet per day, are offline as well.

The price for Brent crude oil, the global benchmark, was up around 4.5% in early Thursday trading to move near $105 per barrel, adding to growing concerns about the global economy as well as its impact on midterm U.S. elections in November.

"Looking at the history of 12-month core inflation, it has been between roughly 2.5% and 3.0% since the spring of 2024," Federal Reserve Chair Christopher Waller said Wednesday. "This is obviously higher than we want, above our target, and not showing sufficient progress." Minutes from the Federal Reserve's meetings from September, released on Wednesday, show policy makers concerned that higher energy costs stemming from geopolitical developments were weighing on core inflation.

Energy is the main source of U.S. inflationary pressures. And it could be durable as the U.S. Energy Information Administration (EIA) on Tuesday raised its forecast for crude oil prices. While the agency said it expected flows to improve in the Middle East, attacks on the East-West pipeline in Saudi Arabia and depleted stockpiles were cause for concern. EIA now expects Brent to average $105 per barrel in the fourth quarter, $14 per barrel higher than last month's forecast. Industrial Info Resources offers more information on the East-West pipeline in its Global Market Intelligence (GMI) Pipeline Database, where readers can find details in a pipeline profile.

"Additional upward pressure on crude oil prices stems from extreme tightness in diesel markets that raises demand for crude oil in order for refiners to meet diesel demand," EIA's report read.

Key Takeaways

• Multiple sources of pressure emerge on oil and gas sector on Thursday.
• Emergency stockpiles are dwindling, while inflationary pressures are growing.

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