Gulf Tanker Freight Adds $12.83 a Barrel as Brent Hits $111.91, 24% Above Goldman's $90 Target

Brent crude for December delivery traded at $111.91 per barrel at 6:45 a.m. ET on Thursday, up $3.09 and the highest level since May 18, according to a Cornerstone Futures morning note. WTI for December delivery traded at $99.30 per barrel, up $2.15. Both quotes follow Wednesday's settlements of $108.82 for Brent and $97.15 for WTI, as reported by The Nation Thailand. Oil Authority could not locate official Thursday settlements at publication time, so this article anchors to Wednesday's settlement and time-stamped Thursday quotes.

Houthi Strikes and US Diplomatic Withdrawals Lift the Risk Premium

Yemen's Houthis struck several Saudi targets on Wednesday, according to Reuters coverage carried by BOE Report. At least one person died and eight were wounded at a civilian airport in Dammam. A drone attack on a Saudi oil field killed two people. The US State Department ordered some diplomats and family members out of its Saudi missions and plans to withdraw families from other regional posts.

Iran's Revolutionary Guard Navy claimed that four vessels in the northern Persian Gulf were hit and three more struck mines west of the Strait of Hormuz. Those claims have not been independently verified. Kpler recorded at least 18 attacks on shipping over the previous two weeks. UKMTO reported a record 12 attacks in or around Hormuz last week.

The Problem Moved From Missing Barrels to Expensive Barrels

JPMorgan's Natasha Kaneva said the problem has shifted from a crude shortage in April to the cost of moving oil in October, as relayed in the Cornerstone note. Kpler data cited there shows Middle East crude exports averaged 17.3 million barrels per day so far in October, up from 16.4 million in September. Hormuz flows stand at 11.7 million barrels per day, 82% of pre-war levels, supported by US-protected convoys along the Omani coast. Oil Authority's calculation from those figures puts pre-war Hormuz flow at 14.3 million barrels per day, leaving a gap of 2.6 million.

Freight is where the cost shows up. Windward's Michelle Wiese Bockmann put a Gulf-to-China supertanker at $1.4 million per day, more than 12 times pre-war levels. War-risk insurance has climbed to as much as 10% of vessel value from under 3%. Kpler's Homayoun Falakshahi said traders can earn an estimated $20 per barrel more by reselling Iraqi crude, which keeps cargoes moving despite the attacks.

What $1.4 Million a Day Means Per Barrel

A very large crude carrier holds 2 million barrels, and a Gulf-to-China voyage runs 20 days one way. Both are standard industry assumptions that belong to Oil Authority, not to Windward. At $1.4 million per day, hire alone costs $28 million per voyage, or $14 per barrel. At one-twelfth of that rate, the pre-war equivalent was at most $1.17 per barrel, so freight adds $12.83 to every Gulf barrel. If both figures describe the same cargo, that increase absorbs 64% of Kpler's $20 resale premium and leaves $7.17 per barrel for the trader.

Forecasters Split on How Long the Premium Lasts

Goldman Sachs targets Brent at $90 and WTI at $83 for the fourth quarter, according to Discovery Alert's summary of bank forecasts. Thursday's Brent quote sits $21.91 above that target, or 24%. Our October 17 report found the EIA forecasting $105 for the fourth quarter against Goldman's $90. Brent has since moved $6.91 above the EIA figure. ING analysts Warren Patterson and Ewa Manthey say a substantial risk premium is priced in and that removing it would take a US-Iran deal restoring confidence in exports.

The Dallas Fed estimates that a Hormuz closure would lift average WTI to $98, per the same summary. WTI at $99.30 already trades above that closure scenario. Rystad Energy's Jorge Leon says a closure could still remove 8 to 10 million barrels per day even after bypass routes are used. The New York Times, citing anonymous US officials, reported that US and Israeli militaries have drawn up plans for strikes on Iran after the November 3 midterms, with refineries and oil sites likely avoided. A Tehran analyst, Peiman Salehi, told Reuters that Iranian retaliation would include Saudi refineries, among them those of Saudi Aramco.

Our October 18 analysis measured a $24.08 gap between Dated Brent and ICE futures on October 15. That gap and the freight cost above are separate charges layered on top of the futures screen. Futures at $111.91 therefore understate what a refiner pays for a delivered Gulf cargo.

US Inventories and the Heating Oil Loan

US commercial crude stocks fell 3.06 million barrels to 412.5 million in the week ended October 16, against a Reuters poll for an 820,000-barrel draw. That marks a third straight weekly decline. Distillate stocks rose 1.68 million barrels to 104.3 million, where analysts expected a 1.16 million-barrel fall. The Department of Energy is offering to lend up to 315,000 barrels from the 1-million-barrel Northeast Home Heating Oil Reserve, with deliveries due by November 13.