Key Points
- Brent crude oil gains 6 per cent; US WTI rises 2.3 per cent over the week
- Houthi attacks on energy facilities and shipping threats fuel the rally
- Strategic reserve releases offer limited relief from supply concerns
ISLAMABAD: Oil prices surged in the week ended October 23, with Brent crude gaining 6 per cent to $116.72 a barrel and US benchmark West Texas Intermediate (WTI) rising 2.3 per cent to $103.27.
Oil prices’ gaining spree continued on the back of Middle East attacks, threats to commercial shipping, and fresh supply disruptions, heightening concerns over global energy supplies.
The rally gathered momentum towards the end of the week, lifting Brent to its highest settlement since April 29.
Oil supply fears drive weekly gains
Oil markets entered the week balancing expectations of additional supplies against persistent risks to Middle East shipments.
Attacks on commercial ships around the Strait of Hormuz and the possibility of further disruption to regional energy infrastructure kept a risk premium in prices.
Authorities in the United Arab Emirates reported an oil spill off the coast near Umm Al Quwain. However, officials had not identified the ship involved or established its cause by Friday.
These developments reinforced concerns that the conflict could disrupt not only production and export facilities but also the shipping routes connecting Gulf producers with international buyers.
Brent leads the late-week rally
Brent crude futures settled at $116.72 a barrel on Friday, gaining $3.55, or 3.14 per cent, in the session. US WTI rose $3.80, or 3.8 per cent, to $103.27.
For the week, Brent advanced a little over 6 per cent, while WTI gained 2.3 per cent.
The difference in their weekly performance reflected the distinct pricing and supply dynamics affecting the two benchmarks. Brent is more directly exposed to international seaborne trade, while WTI primarily reflects conditions in the US market.
The late-week surge also underscored how quickly geopolitical developments can reverse market sentiment.
Even when additional supplies appear possible, the threat of disrupted shipments can lift prices as traders reassess the availability and cost of delivering crude to refineries.
Shipping risks remain central
The Strait of Hormuz remains a critical chokepoint for global energy trade. Any sustained disruption can delay deliveries, increase freight and insurance costs and force exporters to seek alternative routes.
Attacks around the strait and nearby waterways have heightened concern about the safety of commercial vessels. October has become the worst month for attacks on commercial shipping in the area, based on data compiled by a Washington-based maritime security research organisation.
READ ALSO: Oil Prices Hit Five-Month High As Houthi Attacks Threaten Supplies
The risks extend beyond the Strait of Hormuz. Fighting involving the Houthis in Yemen has also raised concerns around Bab el-Mandeb, the southern gateway to the Red Sea, adding another potential pressure point for energy shipments.
Reserve releases offer limited relief
Governments have taken steps to ease supply pressures, but these measures have yet to remove the market’s underlying concerns.
The US Department of Energy authorised an emergency exchange of up to 400,000 barrels of crude oil from the Strategic Petroleum Reserve to address a supply disruption.
Germany also began offering diesel, heating oil and crude from strategic reserves.
Meanwhile, the first shipment of Russian diesel for the United States under a recent export agreement between Washington and Moscow was reported aboard a tanker heading towards New York.
Libya also faced a production reduction after a pipeline valve serving the Hamada and Tahara oilfields was shut, adding another supply concern.
These developments illustrate the difficulty of balancing emergency supply measures against disruptions affecting production, refining and transportation.
Outlook hinges on regional security
Oil prices are likely to remain sensitive to developments in the Middle East, particularly attacks on energy infrastructure and commercial shipping.
For oil-importing economies, higher crude prices can increase import bills, put pressure on foreign-exchange reserves and complicate efforts to contain inflation.
