U.S. crude tops $100 for first time since May as Trump told Iran war could last through end of term

U.S. crude oil futures powered past $100/bbl on Thursday, the highest level in nearly four months, as escalating attacks on Middle East shipping and renewed Houthi strikes on Saudi Arabia have raised concerns about energy supply from the region.

Front-month Nymex crude (CL1:COM) for October delivery surged 6.7% to $102.48/bbl, an eighth straight daily gain for its longest winning streak in three years, and front-month Brent crude (CO1:COM) for November rallied 6.3% to $107.63/bbl, up for a fifth consecutive session; both benchmarks settled at their highest level since May 19.

Front-month Nymex RBOB gasoline (XB1:COM) for October delivery jumped 5.7% to $3.3932/gal, and front-month Nymex ULSD (HO1:COM) for October delivery gained 5.3% to $5.0575/gal, its highest settlement value since April 28, 2022.

Fighting has intensified over the past two weeks - including U.S. strikes on Iranian oil tankers, ballistic missile attacks on Jordan, and Houthi assaults on Saudi energy facilities - and the U.S. and Iran appear to be digging in for a protracted conflict, with little sign of a near-term ceasefire or return to normal Middle East energy flows.

Iranian forces have launched missiles at U.S. warships at least three times in the past week, taking direct aim at the U.S. Navy in a way it has not tried since the start of the war, and Iran also fired a large missile salvo at U.S. forces stationed in Jordan on Wednesday.

Iran-backed Houthi militants seized the strategic Yemeni port city of Mokha on Thursday, expanding their control near the Bab al-Mandeb Strait at the southern end of the Red Sea, adding pressure on an alternative route for crude shipments from Saudi Arabia.

Top White House advisors including Secretary of State Rubio have raised privately with President Trump the possibility that the war could drag on through the end of his term in January 2029, The Wall Street Journal reported Wednesday.

China's buying behavior will be a key factor to monitor to determine whether the oil rally can last, and the country has stepped up purchases recently ​after months of subdued demand, boosting ​physical crude markets, ING analysts ⁠said in a note.

"China, through much of the war, has helped to rebalance the market through lower crude oil imports," ING wrote, but the bank said it is now increasing activity in the physical market, particularly in the North Sea, with crude oil imports still below a year ago but on the path to recovery from June lows.

A boost in Chinese buying could amplify the impact of any supply disruptions and drive prices higher, while a pullback in imports could temper market gains, ING said.

U.S. crude oil inventories fell by less than expected while domestic production hit a record and refineries continued to run near full capacity, the Energy Information Administration reported.

Commercial crude oil stocks excluding the Strategic Petroleum Reserve fell by 391K barrels to 424.1M barrels in the week ended September 4 and were in line with the five-year average for the time of year, the EIA said.

U.S. crude oil production rose 85K bbl/day from the previous week to a record 13.9M bbl/day, while refinery capacity use slipped to 97.8% from 98% the week before.

U.S. gasoline inventories added 1.3M barrels to 206.9M barrels and were 5% below the five-year average, and distillate fuel stocks increased by 2.1M barrels to 106.3M barrels and were 13% below the five-year average.

U.S. natural gas futures edged higher as the EIA reported a fourth straight below-average weekly storage build; the front-month Nymex October contract rose 0.4% to $2.834/MMBtu.

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