Markets
WTI Jumped 2.9% to $102.78 on Reports of New US Strikes
WTI crude rose 2.9% to $102.78 on Wednesday after a report that the US told Gulf allies to prepare for new strikes on Iran. Brent gained 1.3% to $115.32 as US crude inventories fell for a fourth straight week.
Oil reversed two days of losses on Wednesday, October 28, and the trigger was a newspaper report rather than a barrel. December WTI settled 2.9% higher at $102.78 and December Brent 1.3% higher at $115.32, according to Bloomberg via Rigzone, after the Wall Street Journal reported that the United States had told several Persian Gulf countries to prepare for a short, intense military campaign against Iran. President Trump had not decided, the paper said, but was leaning towards a large attack after the November 3 midterm elections, and a third carrier group has been sent towards the Gulf.
Diplomacy is still running alongside. Iran's foreign minister, Abbas Araghchi, said his country "continues to give diplomacy a chance to succeed", and Qatari mediators were reported to have presented Tehran with a new draft agreement on Sunday. Only a day earlier, talks between Iran and officials from Saudi Arabia, Turkey and Pakistan had pushed WTI below $100. In Saudi Arabia, a fire near the Ras Tanura terminal linked to a Houthi missile attack was contained, though the extent of the damage was unclear.
The physical market supported the move. The Energy Information Administration reported that US commercial crude inventories fell by about 1.9 million barrels in the week to October 23, the fourth weekly decline in a row, and gasoline stocks in the Midwest are at a record low. "Global inventories have fallen sharply, with pledged strategic oil reserve releases largely completed," said Giovanni Staunovo of UBS. Brent has nearly doubled this year since the conflict began in February.
Higher oil fed straight into the day's central bank decisions. The Bank of Canada raised its policy rate to 2.5%, saying oil prices and refinery margins were likely to stay higher for longer, and Fed Chair Kevin Warsh noted that energy prices had risen again while declining to signal a December move. Energy was the best-performing sector of an S&P 500 that rose 0.28%.
The $12.54 gap between Brent and WTI at the close shows where the risk sits: in the Gulf's export routes, not in American supply. It also explains why the market moves on reports rather than flows. A campaign that keeps the Strait of Hormuz disrupted for longer would lift Brent more than WTI, a deal that reopens it would do the opposite, and with the midterms five days away both outcomes are now on a short calendar.