Brent crude holds near 5-month high as W Asia tensions stoke supply fears

Brent crude oil prices continued to rise, nearing a five-month peak as geopolitical tensions in Western Asia prompted concerns over supply disruptions. As of 0319 GMT on Tuesday, Brent crude futures increased by 55 cents, or 0.50%, reaching $110.10 a barrel. In the previous trading session, prices had peaked at $110.70, marking the highest level since May 20.

Meanwhile, the US West Texas Intermediate (WTI) crude for November delivery, which is set to expire on Tuesday, saw a 0.24% increase, bringing it to $103.91 per barrel. The more actively traded December contract rose by 39 cents, or 0.40%, to $98.93.

Analysts from ING noted that oil prices are being bolstered by a significant risk premium due to the volatile geopolitical landscape. They commented, "Oil prices remain well-supported... This suggests the market is pricing in a significant risk premium, given the situation's volatility." They added that if oil flows can continue without interruption despite the geopolitical tensions, the risk premium might gradually decrease, although there are currently no indications of this happening.

Concerns over supply disruptions have been fueled by reports of attacks on maritime vessels in the Gulf region. According to shiptracker Kpler, at least 18 vessels were reported to have been attacked over a two-week period, contributing to the sustained risk premium in oil prices.

The Houthi movement in Yemen, which is aligned with Iran, claimed responsibility for several attacks on Monday targeting Saudi energy facilities, military sites, and airports. Among the reported targets were an Aramco facility in Yanbu, the Shaybah oilfield, and both King Khalid International Airport and Abha airport in Riyadh. Saudi officials have not confirmed these claims, and independent verification by Reuters has not been possible.

Additionally, a Houthi assault on a training camp for government security forces in Yemen's Shabwa province resulted in the deaths of 58 individuals and left over 200 others wounded. These renewed attacks have escalated fears regarding regional stability and have underscored the ongoing risks to energy supply from the area, keeping oil prices consistently above the $100 mark.

In the United States, preliminary data from a Reuters poll indicated that crude oil inventories were expected to have decreased last week, along with product stocks. This comes on the heels of an executive order issued by President Donald Trump, which waived certain sanctions and tariffs related to Russia, including penalties on energy purchases. However, Trump mentioned on Saturday that a final decision regarding these measures had not yet been made, while Secretary of State Marco Rubio indicated that officials were seeking more time to assess the situation.

According to the International Energy Agency, Russia's crude oil production rose by 65,000 barrels per day in September, totaling 8.43 million bpd, although this figure remains approximately 870,000 bpd lower than the output from a year earlier. Tim Waterer, chief analyst at KCM Trade, remarked, "While the prospect of additional Russian diesel supply offers some theoretical relief, traders appear far more focused on the ongoing risk of further damage to energy infrastructure across the Gulf region."