Brent Crude Tops $111 as Houthi Attacks on Saudi Arabia Revive Supply Fears
Oil prices are climbing again. Brent crude futures jumped $2.82, or 2.59 percent, to $111.64 a barrel on the 22nd, nearing a five-month high, while U.S. West Texas Intermediate rose $2.24, or 2.31 percent, to $99.39, Reuters reported.
The spark was an attack on Saudi Arabia. Yemen's Iran-linked Houthi rebels struck multiple targets inside Saudi Arabia on the 21st. One person was killed and eight were wounded at a civilian airport in the eastern city of Dammam, and two people died in a drone attack targeting oil fields, Reuters reported.
The United States moved immediately. The State Department ordered diplomats and their families at its missions in Saudi Arabia to evacuate and was also moving to draw down families at other posts in the region, U.S. officials told Reuters.
Stock markets shook as well. Nasdaq 100 futures fell 1.93 percent in premarket trading, S&P 500 futures dropped 1.1 percent and Dow futures slipped 0.69 percent. The oil spike landed on top of revived concern over the cost of artificial intelligence investment after earnings from Tesla and Meta.
ING analysts said in a note that oil prices remain strongly supported, with ICE Brent back above $110 a barrel after the deadly Saudi attacks, Reuters reported.
The risks to shipping are also growing. According to data firm Kpler, attacks targeting vessels over the past two weeks have numbered at least 18. LSEG analysts warned that Iran is targeting oil tankers beyond the Strait of Hormuz and into the Gulf of Oman, putting crude shipments from the Gulf region itself under threat.
The surge is drawing attention because the market's stamina is already worn thin. After the war over Iran began this February, Brent climbed to $118 a barrel in March, and the attacks have continued even since a tentative agreement between the United States and Iran expired in August. Reuters analyzed that prices are rising even though the volume of crude loaded on tankers has recovered to year-earlier levels, at a four-week average of about 157 million barrels, because traders are worried not about today's volumes but about whether exports can be sustained.
Another indicator made supply conditions tighter still. The U.S. Energy Information Administration announced on the 21st that U.S. crude inventories fell by 3.06 million barrels last week to 412.5 million barrels, a far larger drop than the decline of 820,000 barrels expected in a Reuters survey.
Higher oil prices eventually spill into prices at the pump. According to the American Automobile Association, the national average price of regular gasoline in the United States is $4.29 a gallon. AAA spokesman Mark Jenkins said a $10 rise in crude prices can lift pump prices by as much as 25 cents a gallon. Last month in the United States, gasoline prices jumped 9.1 percent in a single month and accounted for more than half of the monthly rise in consumer prices, raising concern that an oil shock could restoke inflation.
Governments and central banks are tensing up again. South Africa's government decided to temporarily reintroduce a fuel tax cut for two months starting next month, and in U.S. markets, expectations that the Federal Reserve will hold rates steady at next week's meeting but raise them by 0.25 percentage point in December are being priced in, Reuters reported, citing LSEG data.
