Brent crude oil soared to $111.75 per barrel on October 20, hitting a five-month high. Previously, there were incidents of attacks on oil tankers, and reports indicated that Saudi Arabia's energy infrastructure was under threat. These factors exacerbated market concerns about disruptions in supplies from the Middle East.
According to Reuters, at least 18 vessels have reportedly been attacked in the past two weeks; meanwhile, the Houthi rebels allied with Iran claim to have launched even more attacks, targeting Saudi Arabia's oil facilities, airports, and military installations.
This round of increase occurred after oil prices fell on Monday. At that time, Brent crude oil once dropped to $107 per barrel due to Washington's relaxation of restrictions on Russian energy. Oil prices then reversed significantly, indicating that the impact of shipping disruptions on prices may be faster than expected new supplies.
After threats to tankers and Saudi infrastructure, Brent crude rose to $111.75
Houthi militants stated that their targets included a facility of the Arab American Corporation located in Yanbu, as well as the Shayba oil field, in addition to several Saudi airports.
In the initial reports, Saudi authorities did not independently confirm these attacks, nor is there any verified evidence indicating that these incidents led to a corresponding decline in crude oil production.
However, the repeated attacks on merchant ships have intensified market concerns regarding the safety of crude oil transportation through the Persian Gulf.
Such risks were already evident when transportation through the Strait of Hormuz was disrupted before; despite a significant improvement in regional export volumes, shipping incidents continue to occur.
Higher security risks will also drive up insurance premiums, freight costs, as well as the costs of providing safety guarantees for available oil tankers.
Previously, some crew members received bonuses of up to $25,000 for undertaking dangerous crude oil transportation tasks in the Persian Gulf.
Middle East crude oil exports have resumed, but supply risks remain
Although the transportation of crude oil from the Middle East has significantly resumed, the latest rise in oil prices has still occurred.
The International Energy Agency's October "Oil Market Report" shows that in September, crude oil exports from the Gulf region increased by 4.4 million barrels per day to 13.9 million barrels per day, exceeding 75% of the pre-war level.
The oil flow through the Strait of Hormuz has also rebounded to 10.9 million barrels per day.
However, higher transportation costs and a new round of attacks are threatening this improvement. The International Energy Agency estimates that since the end of February, global observable oil inventories have decreased by 509 million barrels.
The decline in inventory also confirms the earlier warnings from Saudi Aramco that it may take several years to rebuild global oil inventories.
This disconnect is also reflected in the price of physical crude oil. Previous comparisons of Brent crude oil have indicated that higher freight and insurance costs may cause the ex-factory price of crude oil to be much higher than the level shown by benchmark futures.
Oil Price Outlook: Can Brent Hold Above $110?
The short-term trend of oil prices depends to a large extent on whether there will be more tanker incidents that truly disrupt the delivery of crude oil.
If the attacks continue, shipping risk premiums rise, or export infrastructure is confirmed to be damaged, Brent crude oil prices may remain high. Conversely, if exports from the Gulf region remain stable and security incidents decrease, the current geopolitical premium embedded in oil prices may fall.
The market also faces contradictory demand prospects at the same time.
The International Energy Agency expects that due to high fuel prices and weakening economic conditions, global oil consumption will decline by an average of 2.6 million barrels per day in 2026.
Meanwhile, even if crude oil production recovers, the global diesel shortage may continue until 2027.
