Oil slips in morning trading after 4% surge amid supply disruption fears
Key Facts
Oil prices fell in early Asian trading on October 23, after jumping 4% in the previous session amid fears of further supply disruption. Brent futures fell 21 cents, or 0.2%, to $112.96 a barrel at 00:30 GMT, according to data cited by Reuters. U.S. West Texas Intermediate crude fell 27 cents, or 0.3%, to $98.12 at the same time. The slight decline came after Houthi attacks on Saudi Arabia, the largest oil exporter, led investors to assess the risk of supply disruptions. Those concerns kept the market near elevated levels, although early trading was relatively steady.
Brent closed on Thursday at its highest level since May 4, according to Reuters, and was poised to end the week higher for a third straight week. The run reflects the continued impact of supply risks on prices, even as trading edged lower at the start of Friday. Reuters reported that Saudi Aramco ordered the evacuation of its headquarters in Dhahran on Thursday as fighting with the Houthis in Yemen intensified. The headquarters is on the Gulf near Bahrain, underscoring how security developments have reached facilities linked to the largest oil exporter. Reuters’ report did not establish that the threat of possible U.S. strikes on Iran was a direct cause of price movements.
Supply risks also emerged outside the Arabian Peninsula: Reuters reported that the closure of a valve on a pipeline carrying oil from Libya’s Hamada and Zahra fields to the port of Zawiya cut production at the two fields, citing the head of the National Oil Corporation. In the Gulf, The Associated Press said Tehran announced that 7 oil tankers were set ablaze or damaged in the Strait of Hormuz during the night of October 21 to 22. The agency added that October saw the highest number of reported attacks on commercial shipping since March, according to the UK Maritime Trade Operations centre. A report by Lloyd’s List, as cited by The Associated Press, recorded 28 attacks on ships during October, the highest number since the start of the war. These incidents indicate that market concerns are tied to shipping lanes and crude flows, as well as events that could directly reduce production.
Despite the risks, oil tankers continued to pass through the Strait of Hormuz under U.S. military protection, according to Lloyd’s List data and analysis cited by The Associated Press. The agency reported that spot tanker charter rates had risen to hundreds of thousands of dollars a day, while ship-to-ship oil transfers could take several days. ING analysts told Reuters that markets are increasingly concerned about renewed escalation in the Gulf, a scenario that could threaten oil flows that have so far remained “remarkably resilient.” The analysts added that the mere possibility of escalation could keep a substantial geopolitical risk premium in prices. Aramco CEO Amin Nasser, meanwhile, said the capacity of the East-West pipeline, which bypasses the Strait of Hormuz, had risen from 2 million barrels to 7 million barrels a day.
On U.S. inventories, Energy Information Administration data showed commercial crude stocks, excluding lease stocks, stood at 412.517 million barrels in the week ended October 16, compared with 415.577 million barrels the previous week. In its October outlook, the agency said disruptions to crude production, higher transportation costs and transit risks had added to the risk premium, and it expected prices to remain elevated until constraints on oil flows from the Middle East ease and inventories are replenished. It projected, however, that the average Brent price would fall to $87 a barrel in the second quarter of 2027, then to $74 in the fourth quarter of the same year. U.S. President Donald Trump said, according to The Associated Press, that the United States would not resume military strikes on Iran before the midterm elections. The remarks set a publicly stated timeline for Washington’s position, while price movements remain tied to supply developments and shipping risks.