Oil Set for Second Weekly Gain as Hormuz Strike and IEA Reserve Release Clash

Oil was headed for a second straight weekly advance as growing Middle East supply risks squared off against a fresh release of emergency reserves. West Texas Intermediate traded below $98 a barrel after adding 3% on Thursday, while Brent settled near $106.

WTI has climbed more than 6% this week, outpacing gains in Brent and narrowing the gap between the two benchmarks, helped by a reduction in the cost of shipping American barrels.

Hormuz Strike Confirmed

Uncertainty around a recovery to physical flows from the Persian Gulf has increased. US Central Command on Thursday confirmed that a container ship that sank in the Strait of Hormuz this week was struck by an Iranian projectile.

Eurasia Group analysts expect the conflict to escalate. They raised their odds of an intensification to 65% from 35%, adding that the standoff status quo is no longer sustainable for the US.

IEA Pledges Outstanding Barrels

International Energy Agency member nations pledged to complete the release of 100 million barrels of oil still outstanding from an intervention in March, after lobbying from US officials. President Donald Trump has been working to tame high gas and soaring diesel prices at home. Rising energy costs stemming from the US war on Iran are among key voter concerns ahead of midterm elections next month.

US Crude Stocks Fall Sharply

US crude inventories fell by 8.6 million barrels last week, the biggest drop since February, according to the Energy Information Administration. The fall was driven in part by shut-ins from Hurricane Isaias, strong refinery runs and exports. Distillate stockpiles dropped by 2.5 million barrels to a fresh seasonal low.

Freight economics have also shifted. The cost of sending a typical cargo of US crude from the Gulf Coast to Rotterdam has shrunk about 12% over the past week, according to data from the Baltic Exchange in London. Cheaper shipping has lifted demand for American barrels.

What It Means for Nigeria

Nigeria sells into the same market, so Brent near $106 supports crude earnings and dollar inflows into the federation account. The flip side is costlier imported refined products, higher freight and more pressure on pump prices if the Gulf disruption drags on.