Oil rises as Middle East supply concerns persist amid shipping attacks

Oil prices rose on Thursday on persistent worries about supply from the key Middle East producing ‌region amid an increase in attacks on shipping in the Gulf and the Strait of Hormuz, while the US cut output as a hurricane menaced offshore production.

Brent crude futures rose $2.28, or 2.28%, to $102.28 a barrel by 0427 GMT. US West Texas Intermediate (WTI) crude futures gained $1.66, or 1.88%, to $89.94.

Prices settled lower on Wednesday after the International Energy ​Agency agreed to accelerate the release of oil stocks and to prioritize diesel supplies under a plan launched in March, as governments ​seek to tackle record fuel prices and supply disruptions caused by the Iran war.

However, threats to oil shipping ⁠in the Gulf and the Strait of Hormuz, which carried shipments equal to about 20% of global oil and fuel before the war, ​have increased in October as the US-Israeli conflict with Iran enters its eighth month.

Attacks on tankers sailing through the Strait of Hormuz hit their ​highest last week of any week since the Iran war began as Gulf producers increased exports. The expansion of attacks is occurring as more crude is flowing out of the Gulf but at higher costs and risk to cargoes and crew.

In the latest attack, a tanker north of Qatar was struck by multiple projectiles, causing casualties, ​the United Kingdom Maritime Trade Operations agency said on Wednesday.

"The frequency of Iranian attacks on ships is now at the highest point since ​the war began, and likely to intensify further," said Saul Kavonic, MST Marquee head of energy.

Read: Oil gains as US storm and Houthi air strikes threaten supply

He noted that "constrained product flows, extreme logistics costs and high likelihood of ‌Iranian ⁠escalation are keeping prices elevated".

ANZ analyst Daniel Hynes said in a note on Thursday the IEA's oil release would likely consist of barrels that were already part of the group's original 400-million-barrel release plan at the start of the Middle East conflict, meaning it does not appear to represent an additional draw on strategic inventories.

"Ultimately, strategic stock releases can augment supply flows temporarily but do not create new production capacity," Hynes said.

Hurricane concerns 

Prices are ​also gaining on supply curtailments as ​a hurricane moves toward offshore production ⁠areas in the US, the world's biggest oil producer, causing companies to shut their platforms.

Shell and Chevron said on Wednesday they were curtailing offshore operations in the Gulf as Hurricane Isaias approached.

Overall, US Gulf of ​Mexico oil and gas producers had shut in about 25.08% of current oil production and 16.37% of ​current natural gas production ⁠as of Wednesday because of the storm, according to the Marine Minerals Administration.

Read more: Govt increases petrol by 88 paisas, cuts diesel by Rs1.88 for Oct 6

Inventory data from the US, also the world's biggest oil consumer, were supportive for prices as crude stockpiles fell by a higher-than-expected amount, while diesel inventories declined slightly.

Crude inventories fell by 3.2 million barrels to 424.1 million barrels in the ⁠week ended ​October 2, the Energy Information Administration said on Wednesday, compared with analysts' expectations in ​a Reuters poll for a 1.7 million-barrel decline.

Distillate fuel inventories, including diesel fuel and jet fuel, dropped by 42,000 barrels to 105.14 million barrels, well below their levels reported for ​this time of year in the past five years.