Brent holds above $100 after a 4.1% jump as Trump rules out striking Iran before the midterms

Brent crude futures settled $4.08, or 4.1%, higher at $104.28 a barrel on Thursday. US West Texas Intermediate (WTI) gained $3.21, or 3.6%, to $91.49. The Nation Thailand attributed the move to the Middle East war and to concern about hurricanes. In early Asian trading on Friday, Brent fell about 1% to $103 and WTI fell 0.75% to $90.5, after President Donald Trump said the United States would not attack Iran before the November 3 midterm elections.

Trump's statement removed one path to escalation for the next four weeks. It did not change the physical supply picture. Trump said the US blockade at the Strait of Hormuz would remain in "full force", and Iran has not yet answered Washington's counterproposal on reopening the waterway.

Russell Hardy, chief executive of Vitol, the world's largest independent oil trader, told OilPrice that ship-to-ship transfers in the Gulf of Oman are keeping Gulf crude moving, and that without them the market would face a far larger shortfall. He did not rule out $200 oil. At a London industry forum on October 6, Hardy called $200 a conditional scenario, not a forecast. He said Middle East exports had recovered to about 14 million barrels a day, but that the relay of tankers needed for the workaround had caused a vessel shortage and a steep rise in freight costs.

Refined products are tighter still. Chinese refiners suspended October fuel exports to protect domestic stocks. Four trade sources now say Beijing will let October exports resume after a brief halt. Since March, China has issued its gasoline, diesel and jet fuel export permits one month at a time, so buyers in Asia cannot plan beyond the current month.

For central banks, the price of oil is a real cost that monetary policy cannot change. The Federal Reserve, the European Central Bank and the Reserve Bank of India are each tightening in response to energy-driven inflation. That tightening raises borrowing costs for the rest of the economy without adding a single barrel of supply.