December Brent crude futures slipped 0.3% to $108.42 a barrel on Wednesday, giving up gains that had lifted the benchmark above $110 during the session. December West Texas Intermediate futures fell 0.1% to $97.69 a barrel. Both benchmarks traded higher before reversing.
Brent topped $111 on Tuesday, its highest level since May. Traders are balancing a rebound in Middle East oil exports against menaces to ship traffic via the Strait of Hormuz, as well as strikes aimed at Saudi Arabia, according to The Wall Street Journal.
Iran's Islamic Revolutionary Guard Corps said on Tuesday that two oil tankers hit mines south of the strait and burst into flames. The Saudi-led coalition said on Wednesday that it shot down drones fired at the kingdom, one of which was headed for the Eastern Province, an important oil-producing area.
Qatar's Foreign Ministry said on Tuesday that Washington and Tehran are still communicating through contacts, visits and message exchanges, as the push continues to get the strait open again and defuse the escalation across the region.
Shipments from the Gulf have recovered despite the attacks. Combined volumes moving through the strait and alternative export routes topped 24 million barrels a day during the week ending Oct. 18, exceeding the 23.3 million barrels a day seen before the war, according to The Wall Street Journal. About 40% of Gulf oil cargoes now avoid the strait, versus 17% prior to the war, according to The Wall Street Journal.
Refined-product exports from the Middle East came to 1.9 million barrels daily in September, down from 4.7 million ahead of the fighting, according to The Wall Street Journal.
Oil prices had climbed on Tuesday as attacks on commercial ships in the strait escalated. The November WTI contract rose 5.23% to $109.08 a barrel as of 7:04 a.m. ET, ahead of its expiry that day. At least 18 vessels had been targeted in the strait over the prior two weeks.
The U.S. and Iran signed a memorandum of understanding on June 17, but the agreement collapsed. Iran has demanded sanctions relief and an end to the U.S. naval blockade before the waterway can reopen. President Donald Trump said this month that the U.S. military will hold off on striking Iran until after the Nov. 3 midterm elections.
U.S. Energy Secretary Chris Wright said shipments of crude leaving the Gulf have rebounded to nearly 80% of prewar levels, according to The Wall Street Journal, a lower estimate than the combined flows reported for the week ending Oct. 18, which exceeded prewar volumes.
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