Oil prices advanced on Tuesday, with
Brent hovering around a five-month high as traders priced in a
geopolitical risk premium from Houthi attacks on Saudi
infrastructure and reports of vessel attacks in the Gulf.
Brent crude futures climbed 55 cents, or 0.50 per cent, to
$110.10 a barrel by 0319 GMT, after rising as high as $110.70 a
barrel in the previous session to their highest since May 20.
The US West Texas Intermediate crude (WTI) contract for
November delivery, set to expire on Tuesday, was up 0.24 per cent
to $103.91. The more-active December contract rose 39
cents, or 0.40 per cent, to $98.93.
“Oil prices remain well-supported … This suggests the
market is pricing in a significant risk premium, given the
situation’s volatility,” ING analysts said in a note on Tuesday.
“However, if flows continue uninhibited despite the
geopolitical environment, the risk premium would likely erode
slowly. Clearly, there are no signs of this yet.”
At least 18 vessels were reportedly attacked over two weeks,
which keeps the risk premium intact, shiptracker Kpler said in a
note on Monday.
HOUTHIS CLAIM ATTACKS ON SAUDI FACILITIES
Yemen’s Iran-aligned Houthis said on Monday they launched
several attacks on Saudi energy, airport and military targets,
such as an Aramco site in Yanbu, the Shaybah oilfield,
Riyadh’s King Khalid International Airport and Abha airport.
Saudi authorities did not immediately confirm the claims and
Reuters could not independently verify them.
Also on Monday, a Houthi attack on a training camp for
government security forces in Yemen’s Shabwa province killed 58
people with more than 200 injured.
The renewed attacks heightened fears about regional
stability and underscored continuing risks to energy supply from
the region, keeping oil prices above $100 a barrel.
In the US, crude oil stockpiles were expected to have fallen
last week along with product inventories, a preliminary Reuters
poll showed on Monday.
Friday’s executive order by President Donald Trump waived
key Russia-related US sanctions and tariffs, including goods
duties and penalties for purchases of its energy.
However, Trump said on Saturday he had yet to announce a
final decision on the matter, while Secretary of State Marco
Rubio said officials wanted more time to evaluate the situation.
Russia’s crude oil production increased by 65,000 barrels
per day in September to 8.43 million bpd, but remained about
870,000 bpd below that of a year ago, the International Energy
Agency said last week.
“While the prospect of additional Russian diesel supply
offers some theoretical relief, traders appear far more focused
on the ongoing risk of further damage to energy infrastructure
across the Gulf region,” said Tim Waterer, KCM Trade chief
analyst.