Crude oil rose again on Friday, ending October's explosive rally. Traders pushed prices higher as fears of fresh US military strikes on Iran dashed hopes of quick diplomacy and raised concerns over sudden supply shortages.
At the same time, US energy giants ExxonMobil and Chevron posted stellar quarterly figures. Both companies saw huge jumps in their adjusted profits compared to this time last year, driven by tight refining margins directly linked to the wars in the Middle East and Eastern Europe.
December Brent crude closed 2.2% higher at $113.25 a barrel, while US West Texas Intermediate (WTI) crude for December delivery rose 0.9% to $102.93 a barrel. For the entire month of October, Brent gained an attractive 15.5%, while WTI jumped 13.9%.
Traders are worried due to fear of supply disruption
"In the energy sector, Brent rose to its highest level since April as Middle East tensions added to inflationary pressures globally," market analysts at Britannia Global Markets told clients in a note.
Real-world shipping risks are flashing bright red. On Friday, an explosive device hit a tanker passing through the Strait of Hormuz – the world's most important transit route for crude oil and liquefied natural gas. The United Kingdom Maritime Trade Operations (UKMTO) confirmed the attack, causing panic in commodity desks around the world.
Political developments in Washington rapidly increased tensions. Admiral Brad Cooper, head of US Central Command, gave an in-depth briefing to President Donald Trump at the White House on Thursday regarding possible military action against Iran, the Wall Street Journal reported. Defense Secretary Pete Hegseth and several other senior officials also attended the meeting.
The discussion focused on the continued US naval blockade and the prospects for resuming large-scale combat operations. Trump has already hinted that new attacks could come short shortly after the Nov. 3 US midterm elections, telling reporters on Wednesday that "anything is possible" when asked about future military moves.
Those sharp comments adversely affect peace efforts, while backdoor channels try to keep talks alive. US Vice President JD Vance reached out directly to Iranian security leader Mohsen Rezaei to see if talks could get back on track. Mediators have tried to work out a ceasefire, but Tehran has reportedly rejected it, making any immediate diplomatic breakthrough appear unlikely.
Meanwhile, regional defense systems are on high alert. Saudi Arabia's air defense units intercepted another ballistic missile launched by Yemen's Iran-aligned Houthi group toward the kingdom's Eastern Province on Thursday, according to the Saudi Press Agency. The attack came after the Houthis claimed to have targeted the giant Ras Tanura refining plant earlier in the week. Ongoing attacks against critical oil infrastructure continue to place a heavy geopolitical risk premium on crude oil prices.
Exxon and Chevron post monster earnings
Back on Wall Street, Big Oil took advantage of the chaos. The huge refining spread handed major producers one of their best operating volumes in years.
Exxon said its third-quarter adjusted profit rose a surprise 117.2% year-on-year to $17.51 billion. Chevron posted an even bigger percentage increase, with its adjusted profit rising 185.7% from a year earlier to $10.36 billion.
These record-setting results come at the same time as the US-Iran confrontation and the Russia-Ukraine war continue to disrupt shipping routes and shut down fuel production sites, leading to a sharp increase in refined product margins.
Ayushman Ojha and Scott Kanowski contributed reporting to this article.
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Key Takeaways for Crude Oil and Energy Stock Traders
- Geopolitical risk premium intact:Repeated incidents in the Strait of Hormuz and missile threats near Saudi refining facilities mean crude is likely to fall sharply.
- Refining Margin Fuel Big Oil:Exxon and Chevron's strong balance sheets show that integrated producers are enjoying massive windfalls due to supply constraints.
- Keeping an eye on the elections:Trump's warnings of a post-election strike will keep oil volatile into early November.