By Arathy Somasekhar
HOUSTON, Oct 8 (Reuters) - Oil prices jumped more than 5% on Thursday, then pared gains after President Donald Trump said the US will not launch an attack on Iran before midterm congressional elections in November.
Brent crude futures were up $3.48, or 3.5%, at $103.73 a barrel by 12:41 p.m. ET (1641 GMT). US West Texas Intermediate (WTI) crude gained $2.69, or 3.1%, to $91. At their session highs, both contracts were up more than $5 a barrel, with Brent at its highest since September
29 on worries about potential imminent US strikes on Iran and a supply loss in the US Gulf of Mexico from Hurricane Isaias.
Then, Trump said Washington was having productive discussions with Iran. The Tasnim news agency reported that Foreign Minister Abbas Araqchi said Tehran is reviewing the US response to its proposal under which the Strait of Hormuz could be reopened within seven days, and could reply within days.
Syria was considering providing military assistance to key ally Saudi Arabia for its conflict with the Iran-backed Houthis in Yemen, a US official and a Syrian military official briefed on the matter said. Options being considered include defensive aid or deployment of forces in an offensive capacity to help Saudi-backed Yemeni troops, the sources said.
SUPPLY DISRUPTIONS PERSIST
On Wednesday, oil prices settled lower after the International Energy Agency agreed to accelerate the release of oil stocks and prioritize diesel supplies as governments seek to tackle record fuel prices and war-related supply disruptions.
"Further details surrounding the G7's proposed 100 million-barrel SPR release have disappointed the market, as the barrels appear to be drawn from the previously announced 400 million-barrel release that has yet to be fully marketed," Staunovo added.
Threats to oil shipping in the Gulf and the Strait of Hormuz, which carried shipments equal to about 20% of global oil and fuel before the war, have increased in October as the Iran conflict enters its eighth month, boosting prices.
Attacks on tankers sailing through the strait last week hit their highest level since the war began, as Gulf producers increased exports.
"The frequency of Iranian attacks on ships is now at the highest point since the war began, and likely to intensify further," said Saul Kavonic, MST Marquee head of energy.
"Constrained product flows, extreme logistics costs and high likelihood of Iranian escalation are keeping prices elevated."
HURRICANE ISAIAS
Also boosting prices, a hurricane moved toward US offshore production areas, causing companies to shut their platforms in the world's biggest oil-producing country.
On Wednesday, Shell and Chevron said they were curtailing offshore operations in the Gulf as Hurricane Isaias approached. BP said it has removed all personnel from Na Kika and Thunder Horse platforms and shut in production at both.
Overall, US Gulf of Mexico oil and gas producers had shut in about 25.08% of current oil production and 16.37% of current natural gas production as of Wednesday because of the storm, according to the Marine Minerals Administration.
Inventory data from the US, also the world's biggest oil consumer, supported prices as crude stockpiles fell by a higher-than-expected amount, while diesel inventories declined slightly. [EIA/S]
(Reporting by Nicole Jao in New York and Helen Clark in Perth; Editing by Christian Schmollinger, Joe Bavier and David Gregorio)
