Brent crude tops $110, highest since May, as Hormuz tanker attacks hit supply

Brent crude traded above $110 a barrel on Tuesday 20 October, its highest since May, and US crude briefly touched $110.48 before settling near $105.75, CNBC reported as attacks on tankers in the Strait of Hormuz and Houthi strikes on Saudi oil sites cut Middle East exports. For Pakistan, which imports most of its oil, the jump feeds into petrol and diesel prices, which the government now notifies daily.

The numbers

At about Rs 277 to the dollar, a barrel of Brent now costs roughly Rs 30,650, and a barrel holds 159 litres. You can follow the rupee on our dollar to rupee page.

Why prices are rising

• Hormuz attacks: at least 18 vessels have come under fire in the Strait of Hormuz in two weeks, according to ship tracker Kpler. Iran's Revolutionary Guards said on Tuesday that two "non-compliant" tankers were set ablaze after hitting mines laid by its navy, Iran's Tasnim news agency reported.
• Saudi supply: Houthi strikes on Saudi oil infrastructure are reducing exports, said Tamas Varga of PVM Oil Associates: front-end WTI strength "is a reflection of falling export volumes from the Middle East as tanker attacks and Houthi strikes on Saudi oil infrastructure intensify."
• US stocks: US commercial crude stocks are expected to have fallen last week, he added, and US grades are being bought to replace Middle East crude.

Iran's foreign ministry spokesperson Esmaeil Baqaei said Tehran would answer any US strike "in equal measure, if not more forcefully". President Trump has said US forces will not attack Iran before the 3 November midterm elections.

What it means for petrol in Pakistan

Pakistan now sets petrol and diesel prices under a daily pricing system, with the Petroleum Division notifying each day's rate the evening before. Tuesday's notification cut petrol by Rs 5.16 to Rs 381.14 a litre and diesel by Rs 7.69 to Rs 389.27 (our story), on the back of cheaper cargoes earlier in the month. Because the pump price follows import costs within days, a crude price that holds above $110 would show up in the notified prices soon, unless the government absorbs it through the petroleum levy. Nothing changes until a new price is notified.

PSO's daily ex-depot prices in Karachi are on our petrol price and diesel price pages. Gulf tensions also move the gold price, which Pakistanis watch alongside oil.