West Texas Intermediate crude broke above $100 a barrel for the first time since April this week, closing Friday at $101.83 as Middle East disruptions to tanker traffic in the Strait of Hormuz compounded already-tight supply conditions. Brent crude settled at $105.40.
The catalyst was fresh military activity near the strait, through which roughly 20 million barrels of oil pass daily. Iran-aligned forces disrupted at least three commercial vessels on Wednesday, and insurance premiums for tanker transit through the region have tripled. The White House confirmed it is in active discussions with Saudi Arabia and the UAE about tapping spare capacity, but bringing 4 million barrels per day of OPEC+ slack online takes two to three weeks at minimum.
The energy sector ripped higher all week. The XLE energy ETF gained 4.8%, outperforming every other sector by a wide margin. ExxonMobil added 3.2% for the week, Chevron rose 2.9%, and ConocoPhillips surged 5.1%. The oilfield services names like Schlumberger and Halliburton also rallied, adding 4.5% and 3.8% respectively, as upstream capex expectations rose.
What to watch next week: The key level is $105 on WTI. Above that, the energy sector likely accelerates as momentum traders pile in. Below that, a pullback toward $95 is possible if the Biden administration authorizes a significant release from the Strategic Petroleum Reserve — which currently holds 375 million barrels, near its lowest level since 1983. Traders I spoke to this week said the SPR release is the single biggest risk to the energy rally. Gasoline prices are already at $3.98 nationally, up 35 cents from a month ago. If that number hits $4.25, expect political pressure for a SPR draw to intensify sharply. For now, the oil complex is in control of its own narrative — and that narrative is higher.
