Crude Oil Prices Rise as Global Supplies Tighten

October WTI crude oil (CLV26) closed up +1.55 (+1.69%) on Tuesday, and October RBOB gasoline (RBV26) closed up +0.0379 (+1.18%).

Crude oil and gasoline prices settled sharply higher on Tuesday, with crude oil posting a 3-month high. Crude prices are climbing as escalating hostilities in the Middle East are curbing global oil supplies. Also, Tuesday's decline in the dollar index to a 2-week low is bullish for energy prices.

Crude oil prices jumped on Tuesday after the US and Iran exchanged strikes in the Strait of Hormuz over the weekend, dampening hopes the strait will reopen soon. Also, Saudi Arabia said attacks halted operations at several oil facilities. Saudi Arabia's 400,000 bpd Jazan refinery, which had halted operations in July after an earlier attack, was attacked again on Tuesday with missiles and drones from Yemen's Houthi rebels. In addition, the rebels launched attacks at Saudi Aramco facilities in Abha and Najran, causing fires and injuring several people.

Crude also found support on Tuesday after energy trader Vitol Group said that global oil markets are continuing to tighten, with the loss of about 2 million bpd from crude exports in the Middle East, and a further 2 million bpd from Russia as a result of Ukraine's drone attacks. Data compiled by Bloomberg, Kpler and Vortexa showed that Saudi Arabia's Aug crude exports dropped to about 3 million bpd, the lowest amount in 9 years.

President Trump recently said that the US naval blockade on Iranian ports is putting pressure on the country, and he has no timeline for resolving the US-Iran conflict.

Crude prices also have support on concerns that Israel could be dragged back into the US-Iran conflict. Israeli Defense Minister Katz said last Thursday that an Iranian attack on Israel would free Israel from any existing restrictions in a response against the regime in Iran. Israel has ramped up attacks on Iran-backed Hezbollah in Lebanon, dampening the prospects of ending hostilities in the Middle East and a quick reopening of the Strait of Hormuz. In addition, Israel has struck Iran-backed Hamas in Gaza, while the Yemen- based Houthis have attacked ships in the Red Sea.