Brent crude hits $110 for first time since May; U.S. WTI tops $100

Brent crude oil hit $110/bbl for the first time since May, and WTI crude rose by the largest weekly percentage since July on concerns over continued Middle East supply risks and uncertainty over shipping through the Strait of Hormuz, as well as Ukraine's renewed targeting of Russian refineries.

Shipping risks remain high after two cargo ships sank near the Strait of Hormuz following attacks this week, and risks to shipping have raised freight and insurance costs, contributing to the higher price of oil.

Ukraine reportedly struck Russia's Ryazan ⁠refinery on Thursday after President Zelenskyy declared his country was abandoning a ceasefire covering energy sites announced a week ago by President Trump.

"We're still in a bull market," BOK Financial senior VP of trading Dennis Kissler said in a note, as flows through the Strait of Hormuz are not reliable, expectations of Russian diesel coming onto the market are not being met, and with Ukrainian attacks on refineries, "those barrels are going to have trouble getting to the market."

A third factor is that demand destruction "at least in the U.S. is not happening," Kissler added, noting this week's report of surprisingly large drawdowns of U.S. fuel inventories, with distillate inventories—which include diesel and heating oil—at 102.6M barrels, according to the Energy Information Administration, down 12% Y/Y.

The U.S. Department of Energy requested an exchange of up to 17M ​barrels of crude from the Strategic Petroleum Reserve on Friday, after previously agreeing to loan 172M barrels of oil from the SPR as part of a wider deal with International Energy Agency member states to release 400M barrels from reserves around the world.

However, oil prices above $100 look increasingly stretched relative to market fundamentals, as Middle Eastern exports have largely recovered and global oil inventories remain comfortable, Julius Baer's Norbert Rucker said in a note.

Diesel supply concerns could also ease as higher product exports and reduced refinery maintenance support availability, Rucker added.

On Friday, front-month Nymex crude (CL1:COM) for November delivery jumped 3.5% to $101.41, its highest settlement value since September 17, and front-month Brent crude (CO1:COM) for December delivery surged 3.7% to $109.86/bbl, its best close since May 19.

Front-month Nymex ULSD (HO1:COM) for November delivery added 1.1% on Friday to $4.8991/gal, while front-month Nymex RBOB November gasoline (XB1:COM) gained 1.7% to $3.2354/gal.

For the full week, Nymex soared 10.4%, its largest one-week percentage gain since the week ending July 17, Brent crude climbed 4.9%, its fourth consecutive weekly gain, ULSD jumped 3.4%, but RBOB fell 1.8%.

U.S. natural gas futures (NG1:COM) fell on Friday as the market appeared to look past this weekend's anticipated cold spell in the Northeast that is expected to drive up residential and commercial heating demand; the front-month Nymex November contract fell 3.7% on Friday to $3.1160/MMBtu, down 3.2% on the week.

Friday's top five stocks on the S&P 500 leaderboard belonged to the oil and gas sector: Targa Resources (TRGP) up 4.4%, Diamondback Energy up 4.3%, EOG Resources (EOG) up 4.2%, Kinder Morgan (KMI) up 4.2%, APA Corp. (APA) up 4.1%.

Energy stocks, as represented by the State Street Energy Select Sector SPDR ETF (XLE), rose 4.8% this week.

ETFs: (USO), (BNO), (UCO), (SCO), (USL), (DBO), (DRIP), (GUSH), (USOI), (UNG), (BOIL), (KOLD), (UNL), (FCG), (XLE), (XOP)