Oil prices hit nearly six-month high as Saudi attacks raise supply concerns

• Brent settled at USD116.72 a barrel, while US crude closed at USD103.27 after both gained more than USD3.
• Attacks in Saudi Arabia and shipping security concerns raised fears of further disruption to Middle Eastern supplies.
• The US authorised an emergency crude exchange, while Germany moved to release oil from strategic reserves.

Oil prices climbed to their highest levels in nearly six months on Friday as attacks on Saudi Arabia’s energy infrastructure and concerns over tanker security heightened fears about disruptions to Middle Eastern supplies.

Brent crude futures rose USD3.55, or 3.14 percent, to settle at USD116.72 a barrel, their highest closing level since April 29. US West Texas Intermediate (WTI) crude gained USD3.80, or 3.8 percent, to close at USD103.27.

Both benchmarks also recorded weekly gains, with Brent advancing 6 percent and WTI rising 2.3 percent.

Adam Turnquist, chief cross-asset strategist at LPL Financial, attributed the rally to supply concerns following a series of Houthi attacks across Saudi Arabia, including strikes targeting energy infrastructure.

Saudi Aramco ordered the evacuation of its headquarters in Dhahran, near Bahrain on the Gulf coast, on Thursday, Reuters reported. The development came as fighting intensified between Saudi Arabia, the world’s largest crude exporter, and Yemen-based Houthi forces.

The UAE’s Ministry of Climate Change and Environment also reported an oil spill from a tanker off the coast of Umm Al Quwain. Authorities did not identify the vessel or disclose what caused the spill.

Shipping sources had reported on October 9 that an unidentified projectile struck the Gem No. 2 supertanker around 13 nautical miles, or 24 kilometres, west of Al Jazeera in the UAE.

Andrew Lipow, president of Lipow Oil Associates, said concerns about what he described as increasing Iranian attacks on tankers were weighing on the market. Although more oil had been moving through the Strait of Hormuz, he warned that flows could change suddenly.

Fighting between the Houthis and the Saudi-led coalition supporting Yemen’s internationally recognised government has continued since Houthi forces advanced towards the Bab el-Mandeb Strait last month. The waterway is a major shipping chokepoint at the entrance to the Red Sea.

According to data compiled by a Washington-based think tank that has monitored maritime security incidents worldwide since 2017, October has been the worst month for attacks on commercial shipping in the Strait of Hormuz and nearby waters.

US President Donald Trump said on Friday that Washington could bring the war with Iran to a swift end, while also suggesting that the conflict could be allowed to wind down gradually.

Meanwhile, the US Department of Energy authorised an emergency exchange of up to 400,000 barrels of crude from the Strategic Petroleum Reserve to address a supply disruption affecting Phillips 66’s Lake Charles refinery in Louisiana.

The reserve is already at its lowest level since 1982 following withdrawals by Trump as the US war with Iran disrupted supply routes. Former president Joe Biden also released oil from the reserve after Russia invaded Ukraine.

Germany’s national oil stockpiling agency, EBV, circulated a tender to sell diesel, heating oil and crude from strategic reserves. The move marks Germany’s first such releases since G7 countries agreed at the beginning of October, under pressure from Trump, to draw on emergency stocks.

Libya also faced a production setback. The head of the National Oil Corporation told Reuters on Thursday that a valve on the pipeline linking the Hamada and Tahara oilfields to Zawiya port had been shut, reducing output at both fields.

Separately, ship-tracking data showed a tanker carrying the first Russian diesel shipment bound for the US since an export agreement between Moscow and Washington heading towards New York.

Trump announced the agreement earlier this month as part of efforts to lower rising diesel prices ahead of the US midterm elections on November 3.

US drilling activity remained unchanged for a second consecutive week, according to Baker Hughes. The energy services company said the combined oil and gas rig count, an early indicator of future production, held at 603 in the week ended October 23.