Oil prices climbed in early Asian trade on Wednesday as renewed Houthi attacks on Saudi Arabia reignited supply fears in the region. Falling inventories and reports that the U.S. is preparing for a new military campaign against Iran after the midterm elections added to the upward momentum.
At the time of writing, Brent oil futures were trading at $115.70 per barrel, up 1.62% on the session, while West Texas Intermediate futures had risen 1.34% to trade at $101.20 per barrel.
The most recent gains came after a nearly $2 decline on Tuesday, a decline driven by hopes that the most recent round of diplomatic talks between Saudi, Turkish, Pakistani, and Iranian officials would bear fruit.
The most immediate concern for oil markets revolves around reports that Saudi Arabia’s Ras Tanura complex has been targeted. The Houthis claimed on Tuesday that they had struck the 550,000-barrel-per-day Ras Tanura refinery with a ballistic missile.
At the time of writing, Saudi authorities have not confirmed a direct hit on the refinery, and there has been no independently verified evidence of extensive damage or a major interruption to operations.
Reports suggest that a fire near Saudi Aramco’s facilities at Ras Tanura was contained following an attack in the region early Tuesday. The extent of any damage remains unclear.
While the details around the refinery attack are disputed, the broader wave of attacks has been well documented. Saudi officials reported intercepting three ballistic missiles aimed at the kingdom’s Eastern Province and four drones directed toward southern Saudi Arabia on Tuesday. Saudi air defenses also intercepted two missiles targeting Riyadh, where falling debris damaged a building, a construction site and a vehicle, according to Saudi Civil Defense statements reported by the Associated Press.
Separately, the Houthis claimed a direct hit on Saudi Arabia’s Defense Ministry in Riyadh and attacks on military aircraft; again, those claims have not been verified.
For oil markets, Ras Tanura remains the critical element of these latest attacks, as it combines substantial refining capacity with a critical export terminal on the Persian Gulf.
Concerns surrounding the latest attacks on Saudi Arabia have been compounded by a new report from the Wall Street Journal, which claims the United States has warned several Gulf Arab countries to prepare for the possibility of a short, intense military campaign after the November 3 U.S. midterm elections.
If nothing else, the latest round of attacks on Saudi Arabia and rumors of a new U.S.-Israel offensive on Iran suggest Monday’s diplomatic efforts have resulted in little to no progress in bringing peace to the region and resuming oil flows.
Meanwhile, U.S. inventory data offered additional support for crude prices, with the American Petroleum Institute estimating that crude inventories fell by approximately 2.03 million barrels in the week ending October 23. The bullish impact of that report was somewhat tempered by a rise in both gasoline inventories and distillate stocks.
Traders will now be watching Wednesday’s EIA inventory report closely for confirmation of those trends.
By Josh Owens for Oilprice.com
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