Brent jumps 4% to $113.17 as tensions escalate and Libyan supplies are disrupted
Key Facts
Brent crude jumped 4% to $113.17 a barrel during Thursday's session after touching a 5-month high, according to the Associated Press, amid tensions in Saudi Arabia and disruptions to Libyan supplies. The rally extended to December West Texas Intermediate crude futures, which rose 2.2% to $99.31 a barrel during the session, according to an Investing.com update. In Saudi Arabia, the benchmark stock index fell 2.5% following news concerning the evacuation of Aramco's headquarters, according to London Stock Exchange Group data cited by Reuters. The moves in oil and equities coincided with demand for safe havens in U.S. bond markets during Thursday's trading. Reuters said the demand pushed the yield on 10-year U.S. Treasury notes lower to around 5.0025%.
Saudi Aramco asked employees to evacuate its headquarters in Dhahran and continue working remotely as fighting resumed between Saudi Arabia and the Houthis, Reuters reported, citing sources familiar with the matter. The sources described the instructions as being to "evacuate the building and work remotely." The specific reason for the evacuation was unclear, while the company did not immediately respond to a request for comment, according to Reuters. In a security development on Thursday, the Saudi-led coalition said it had intercepted drones over Riyadh and Medina. The renewed fighting ended a truce brokered by the United Nations in 2022 that had largely halted cross-border attacks. The military escalation thus resumed after a period in which the truce had curbed those attacks, coinciding with employees at Aramco's headquarters switching to remote work.
In Libya, the head of the National Oil Corporation told Reuters that the closure of a valve on a pipeline linking the Hamada and Tahara fields to the port of Zawiya had reduced output at both fields. Identifying the point of disruption, the corporation's head said "a valve on an oil pipeline from the Hamada and Tahara fields to the port of Zawiya was closed." The decline in output at the two fields coincided with continued crude production outages in the Middle East, according to estimates from the U.S. Energy Information Administration. The agency estimated that production outages in the region averaged 4.8 million barrels per day in September, compared with 5.8 million barrels per day in August. The monthly comparison showed a decline in the volume of shut-in production, with some crude remaining off the market in the month preceding the escalation and news of the Libyan disruption.
Pressures on oil supplies also include the cost of transporting them to buyers, with the U.S. Energy Information Administration saying risks to tanker transit had raised freight rates and the risk premium in crude prices. The agency said oil tanker freight rates reached record levels in September, noting that the increase reflected higher insurance costs. Higher insurance costs in turn feed through to the cost of crude delivered to refineries, according to the agency, adding to the cost of getting supplies to their destinations. Alongside higher freight rates and insurance costs, ships are taking longer routes to avoid conflict zones, according to the agency's assessment of maritime transport. It said longer voyages limit the number of vessels available, with constraints on tanker availability coinciding with higher costs for using them to transport oil.
For the fourth quarter of 2026, the U.S. Energy Information Administration forecast continued constraints on oil flows from the Middle East, despite the decline in average production outages between August and September. It estimated that production remaining offline during the quarter would average 4.5 million barrels per day, as part of its forecast for continued constraints on flows during that period. In its October report, the agency raised its forecast for the average Brent spot price in the fourth quarter to $105 a barrel. That estimate is $14 a barrel above its forecast in the previous month's report, in a revision that coincided with continued supply constraints and high transport costs. The agency's forecasts thus include some of the region's production remaining offline during the final quarter of the year, alongside a higher estimate for Brent spot prices over the same period.