Key Points
- Brent crude rises more than 1 per cent in early trading
- US crude climbs towards $96 a barrel
- Russian diesel supplies may limit further gains
ISLAMABAD: Oil prices rose on Wednesday as fresh Houthi attacks on Saudi Arabia heightened concerns about regional oil supplies, while the prospect of additional Russian diesel exports offered a counterweight to market fears.
Brent crude futures rose to $107.35 a barrel, up $1.40, or 1.35 per cent, while US West Texas Intermediate (WTI) crude futures gained $1.24, or 1.32 per cent, to $95.38, according to early Asian market updates.
Earlier trading reports put Brent at around $106.60 and WTI near $95, reflecting price movements within the early trade session.
The latest gains followed a mixed sentiment on Tuesday, when Brent fell 0.9 per cent while WTI advanced 0.4 per cent.
The contrasting movements reflect a market balancing fresh geopolitical risks against the prospect of additional fuel supplies and efforts to restore disrupted oil shipments.
Gulf security risks continue to limit market decline
The latest pressure on prices followed an attack on an administrative building at Saudi Aramco in Dhahran, Saudi Arabia’s eastern oil-producing region.
The Saudi Ministry of Energy reported a limited fire, with no injuries. The incident marked escalating missile and drone attacks by Yemen’s Houthis on Saudi targets.
The escalation has raised concerns about disruptions to energy supply infrastructure and shipping routes serving one of the world’s largest oil-exporting countries.
The conflict adds to the risks stemming from the US-Iran war, which began on February 28 and disrupted energy shipments through the Strait of Hormuz.
The Strait is a strategic waterway that handled roughly one-fifth of global oil and liquefied natural gas trade before the war, so any sustained disruption is a major concern for oil-importing economies.
Bloomberg reported Tuesday that oil retreated after rising more than 6 per cent over the previous three sessions. Traders weighed the prospect of Gulf supplies recovering against renewed attacks.
READ ALSO: Oil Prices Fall as Russian Diesel Offers Relief
The latest escalation has reinforced concerns that the shipment recovery could be vulnerable to further disruption.
Although oil has continued to move through the region, attacks on commercial shipping, higher shipping and insurance costs, and uncertainty over safe passage have complicated efforts to restore normal trade.
Russian diesel offers a counterweight
The market is also assessing the potential impact of additional Russian diesel supplies.
The United States has moved to facilitate extra Russian fuel exports, raising expectations that increased availability could ease pressure on refined-product markets.
However, the additional supplies may offer only limited relief. A report published by Barron’s on Tuesday, citing Goldman Sachs analysts, estimated that the measure could lower global diesel prices by just $1 to $2 a barrel.
Questions also remain about Russia’s ability to deliver the proposed additional volumes amid refinery disruptions.
Diesel availability matters to the overall oil market because a shortage of refined fuel can raise processing margins and increase transportation costs for industry and agriculture even when crude prices are falling.
Any relief in diesel supplies could therefore moderate pressure on fuel markets without eliminating the geopolitical premium embedded in crude prices.
The competing forces leave oil prices vulnerable to sharp swings. Further attacks on Saudi facilities or commercial shipping could renew upward pressure, while a sustained recovery in Gulf exports and additional refined-fuel supplies could limit gains.
For oil-importing countries, including Pakistan, continued volatility in crude and refined-product markets raises the risk of rising import costs, domestic fuel prices and inflation.
Since the Iran war began on February 28, oil markets have swung as traders reassess supply risks, shipping disruptions and prospects for restoring exports via the Strait of Hormuz.
Periods of price gains, driven by fears of prolonged disruption, have alternated with declines, fuelled by hopes of de-escalation and recovering supplies.
The volatility has spread beyond crude to diesel, jet fuel and other refined products, reflecting constraints in refining, transport and distribution.
