Markets
WTI Fell 2.5% and Ended an Eight-Session Winning Streak on Reports of US-Iran Mediation. Brent Had Touched $111.99, and Gulf Exports Are Down to 8.5 Million Barrels a Day
Crude oil reversed on October 20. Brent rose to $111.99 a barrel in the morning, its highest since mid-May, after new attacks on tankers near the Strait of Hormuz and Houthi strikes on Saudi energy sites, then settled 0.7% lower at $108.79 on reports that mediators were exploring a framework to revive talks between Washington and Tehran. WTI fell about 2.5% to just above $101, its first decline in nine sessions after a run that had added more than 20%. Kpler puts Gulf crude exports at 8.5 million barrels a day, against more than 20 million two weeks ago.
The oil market spent Tuesday pricing two opposite stories in the same session. In the European morning Brent crude rose to $111.99 a barrel, its highest since mid-May, after reports of further attacks on tankers in the Strait of Hormuz and Houthi claims of strikes on Saudi energy infrastructure that Riyadh did not confirm. By the New York afternoon it had reversed: reports that mediators were exploring a framework to bring the United States and Iran back to the table took the December Brent contract to a settlement of $108.79, down 0.7%, and WTI fell about 2.5% to just above $101 in late trading, according to Yahoo Finance; the December Nymex contract settled at $97.82. It was the first loss for US crude after eight straight gains that had added more than 20%.
The physical market has not reversed. According to Kpler data cited by FinanceFeeds, crude exports from the Gulf have fallen to about 8.5 million barrels a day, from more than 20 million two weeks earlier, as tanker owners refuse the transit or wait for escorts. That is the gap between a diplomatic headline and a supply fact, and it is why Brent was back above $110 in the Asian session on Wednesday morning, at $109.94 by 05:00 UTC, with WTI near $98.80. The 52-week high of $118.35 was set on March 31; the low, $58.92, a year ago.
The rest of the market moved with the afternoon headline rather than the morning one. The 10-year Treasury yield slipped two basis points to 5.12% after an eight-session rise in oil had pushed it back above 5.15% on Monday, the dollar index fell 0.3% to 101.73, and the Dow rose 1.02%, led by industrials. Gold did not get the bid it usually gets from a Gulf crisis: spot fell 0.4% to about $4,122 an ounce, a third straight decline, because an oil-driven rise in inflation expectations has revived bets on a December rate increase, priced above 90% by FXStreet's count on Monday. Silver rose 1.45% to $57.80.
For the Federal Reserve, which meets on October 28 in its blackout period, oil is the number that decides whether the September CPI report was a peak or a step. For equities, Tuesday's pattern, a 1% rally on a 2.5% drop in crude, shows how much of this month's weakness in consumer and transport stocks is an oil trade. The signal to watch is not the next headline about talks but the Kpler export figure: when it rises back toward 15 million barrels a day, the reversal is real. Until then, a settlement at $108.79 is a lower close in a market that is still short of oil.