Oil Wrap: USO up 2.86% on Red Sea Supply Fears

01 The session in one read

Oil futures staged a strong rally during the trading day, with the USO exchange-traded fund that tracks US-traded WTI crude settling at US$153.09, up 2.86%. The driver was not a demand surge, but a price shock in the shipping lane: war-risk insurance for Saudi-linked tankers using the Red Sea port of Yanbu has tripled to about 3% of a vessel’s value since early July, making every barrel costlier before it is even refined.

That has rippled outward to Asian buyers. Freight now represents roughly a fifth of the cost of a crude cargo, with Japan’s imports among the most expensive in the world as the very large crude carriers become the market’s new choke point.

The physical market is bending itself around the risk. Vitol took at least 25 million barrels of discounted Iraqi crude for September loading as Baghdad offered around US$15 off to keep flows moving through the Strait of Hormuz, the kind of forced discount that reshapes who can afford to sell and where the cargo goes.

02 The board

The USO fund’s 2.86% jump to US$153.09 was the cleanest expression of the crude tape, a raw bid for the kind of tight supply that war premiums imply. But the Latin American share board was not buying the enthusiasm. Petrobras slid 1.42% to US$20.84, a drop that looks even starker against the backdrop of its new deepwater pre-salt qualification work on corrosion-resistant flowlines for 2027.

Ecopetrol underperformed everyone with a 1.92% fall to US$16.37, while YPF gave up 0.59% to US$53.61. The inconsistency between a hot crude fund and cool producer stocks is the session’s core takeaway: the market views geopolitical shipping pain as a cost, not a gift, for most Latin American sellers.

Source: RT close, 2026-09-24. Where a commodity has no spot feed, an exchange-traded tracker or leading producer is shown as a labelled proxy.

03 What moved it

The big new fact was the tripling of Red Sea war-risk insurance for Saudi-linked ships calling at Yanbu, which sits outside the most dangerous choke point but is no longer a safe workaround. That pushed freight and security into the conversation usually reserved for headline supply losses from Iran or Houthi attacks.

Japan’s import bill shows how far this has spread. With a fifth of a crude cargo’s cost now attributable to freight alone, traders are starting to price crude not as a single barrel but as a barrel plus a shipping slot and an insurance policy. That is why Iraq needed discounts near US$15 to attract a buyer like Vitol even for very large volumes.

The result is a market that rallied on safety concerns rather than strong end-use demand. That is a subtle but important distinction for Latin American producers, because ships leaving the Americas do not pay Middle East war-risk premiums but often earn a lower netback when buyers have to absorb higher opex.

04 The Latin American read

Brazil’s Petrobras is pressing ahead with technology for its deepwater pre-salt, including a thermoplastic-composite flowline tested with Shell and Strohm, with a pilot installation planned for early 2027. That long-cycle work matters more for future cost per barrel than for Thursday’s price action, which saw the stock fall despite the crude rally.

Guyana’s rise is becoming a defining part of the region’s oil map. ExxonMobil’s Yellowtail development in the Stabroek Block is expected to add barrels before year-end, and the company is studying an optimization that could lift the ONE GUYANA vessel to about 290,000 barrels per day, a level that would make a small country a major global supplier.

Mexico’s Pemex remains the region’s most watched and most fragile large producer, with its second-quarter output at 1.658 million barrels per day and a live debate over introducing private partners to arrest decline. Venezuela shows a different kind of disruption: a US-linked agreement dated September 1 reassigned 17 oil fields, replacing Chinese- and Russian-linked operators and redrawing who actually pumps the country’s barrels.

05 The names to watch

Petrobras is the bellwether for whether investors see this crude rally as worth the region’s operational and political overhead. Its 1.42% drop on a day when oil jumped suggests caution about management’s capital allocation even as pre-salt technology improves the long-run cost curve.

YPF’s 215,000 barrels per day shale oil target for Vaca Muerta and its US$160 million commitment to 12 horizontal wells connected to an Argentina LNG project make it the most leveraged name to a sustained high-price environment in the region.

Ecopetrol’s 1.92% decline is the outlier that deserves the most attention, because Colombia is more exposed to shipping routes and investor anxiety about volumes than its peers. Any further weakness in that stock on strong oil days would signal a company-specific discount building into the tape.

06 The outlook

The market’s problem is that it is pricing insurance rather than barrels. The next move depends on whether war-risk premiums stay near 3% of vessel value and whether Iraqi discounts continue to lure large traders. For Latin American equities, the question is simpler: will investors believe the region can charge a higher price for its crude without bearing the Middle East’s costs? That answer did not appear in Thursday’s share moves.

07 What to watch

• Red Sea war-risk premiums: The tripling to around 3% of vessel value is the single biggest factor pushing crude’s cost higher before delivery.
• Iraqi official selling price discounts: The US$15 discount offered to Vitol signals how hard producers must work to keep barrels moving through Hormuz.
• Guyana Yellowtail ramp: ExxonMobil’s study to lift the ONE GUYANA vessel to 290,000 barrels per day could add unexpected supply into a tight market.
• Pemex private partner debate: Any new framework for private capital would change the supply outlook for a producer stuck near 1.658 million barrels per day.

Frequently Asked Questions

Why did USO jump while Latin American oil stocks fell?

The USO fund tracks WTI crude exposure and reflects the global shipping and war-risk premium, while Petrobras, Ecopetrol and YPF are equities that include sovereign, operational and corporate risk. Traders on Thursday were buying the commodity but not the companies.

What does the Red Sea insurance increase mean for oil prices?

War-risk premiums for Saudi-linked tankers calling at Yanbu have tripled to about 3% of a vessel’s value, making the Red Sea workaround nearly as expensive as sailing through Hormuz itself. That raises the break-even for every barrel moved through the region.

How is Latin America affected by the Middle East disruption?

Latin American producers do not face the same war-risk premium on most routes, but they sell into a global market where freight and insurance are now a fifth of a cargo’s cost. That can squeeze the netback for regional sellers even when crude prices rise.

What is the most important driver to watch next?

Freight and war-risk insurance costs are the key variable. If premiums stay near 3% and Iraqi discounts persist, expect the market to keep trading on supply-chain pain rather than demand strength.

Market data: RT

This article was produced by The Rio Times’ automated newsroom system. How we use AI · Report an error

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