Oil prices rise on Red Sea shipping risks, threats to Saudi oil sites

Oil prices experienced an uptick on Wednesday, driven by concerns over supply disruptions in West Asia, particularly related to shipping risks in the Red Sea and threats to oil facilities in Saudi Arabia. As of 0022 GMT, Brent crude futures increased by 85 cents, or 0.78%, reaching $109.64 per barrel, while US West Texas Intermediate (WTI) crude rose by 76 cents, also a 0.78% increase, settling at $98.58 per barrel.

The rise in prices follows reports of heightened tensions in the region, notably after an incident involving a supertanker that caught fire after hitting a sea mine south of the Strait of Hormuz. This incident was reported by Iran's Revolutionary Guards Navy, which accused the vessel of "violating" Iranian regulations. Additionally, ship-tracking service Kpler noted that there have been at least 18 attacks on vessels over the past two weeks.

Analysts from LSEG highlighted that the scope of these attacks has expanded beyond the Strait of Hormuz, with Iran allegedly targeting ships as far south as the Gulf of Oman. This escalation poses risks not only to loading operations in the Arabian Gulf but also to ship-to-ship transfers that have been crucial for supporting oil loadings in the region amid ongoing conflicts.

On Monday, the Houthi movement claimed responsibility for attacks targeting various Saudi facilities, including a site operated by Saudi Aramco in Yanbu, as well as the Shaybah oilfield and airports in Riyadh and Abha. The situation escalated further, with reports indicating that the death toll from a recent Houthi strike on Yemeni government forces rose to 73 amid intensifying hostilities.

In the previous trading session, oil prices had declined after Iranian President Ebrahim Raisi discussed mediation efforts with Pakistan's army chief in Tehran. On Tuesday, Brent crude futures settled down by 76 cents, or 0.69%, at $108.79, following a peak of $111.99, which was the highest price in five months. The November contract for WTI crude, which expired on the same day, closed down $1.87, or 1.8%, at $101.79.

Iranian Foreign Minister Abbas Araqchi stated in a televised interview on Tuesday that Iran has yet to receive a response from Saudi Arabia or the Houthis regarding its proposal to facilitate peace talks. Meanwhile, in the United States, two officials from the Energy Department reported that they are collaborating with refiners globally to increase fuel production in response to rising diesel prices caused by a supply shortage.

Additionally, US crude oil stockpiles were anticipated to have decreased in the previous week, along with product inventories, according to an extended Reuters poll. Analysts surveyed by Reuters estimated that crude inventories fell by approximately 800,000 barrels in the week ending October 16.