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Below the Perspective on Crude Oil Holds Near Four-Month High as Two Key Chokepoints Come Under Threat by Ashish Rajodiya, Head - Commodities, PL Capital

Crude oil is trading near $104.68 a barrel this month, holding close to Tuesday's four-month high of $107.5-108 on Brent, as the market grapples with an unprecedented situation where two of the world's most critical oil shipping chokepoints are now under threat simultaneously.

The Strait of Hormuz, through which nearly a fifth of global oil supply passes, has already seen disrupted tanker flows following Iran's blockade on shipping in the region, forcing Saudi Arabia to route crude through its East-West pipeline to the Red Sea instead. That alternate route has now come under direct attack, with the pipeline forced offline and Saudi Arabia cancelling export shipments to European customers, pushing its output to its lowest level since 1990. Adding to the crisis, Houthi militants have escalated strikes on the Bab el-Mandeb strait, the narrow passage at the southern end of the Red Sea that vessels rely on as they try to bypass Hormuz — effectively squeezing the market from both ends of the region's shipping map at once. Libya has compounded the supply strain, suspending activity at several oilfields amid domestic protests. On the demand side, China has been drawing down stockpiles and raising import orders, while the US Strategic Petroleum Reserve sits near a record low, leaving virtually no cushion anywhere in the system. Crude is up close to 20% over the past month as a result, and with a reported rise in US crude inventories offering only a modest check on prices, the market's attention now turns to the Federal Reserve's rate decision later today — a hawkish outcome could weigh on demand expectations, but any sign of further escalation at either chokepoint is likely to matter more for oil than anything the Fed says.

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