Brent rises to $113.75 a barrel as Middle East supply concerns persist
Key Facts
Brent crude futures rose to $113.75 a barrel on the morning of publication amid persistent concerns over Middle East oil supplies and attacks on sites in Saudi Arabia during the week. According to Reuters, futures gained 58 cents, or 0.5%, by 04:39 GMT, in trading coinciding with continued disruption across the oil-producing region. Investing reported that the Houthis had targeted several government sites in Riyadh during the week, among the attacks cited in its morning oil market coverage. The targets also included a Saudi Aramco site in Yanbu and two separate airports, according to the website. The developments come as the U.S. Energy Information Administration assumes constraints on Middle East oil flows will persist through the fourth quarter, with production shut-ins averaging 4.5 million barrels per day.
Yanbu figures in the supply disruptions as a port through which oil exports exceeding 5.0 million barrels per day, carried by Saudi Arabia's East-West pipeline, had passed before the attacks, according to EIA estimates. The estimate appeared in the October Short-Term Energy Outlook, which addressed the pipeline's status and the temporary interruption to its flows caused by the attacks. The agency said the pipeline had been repaired and oil flows through it had partially resumed by September 22. Describing its operating status on that date, it said the pipeline had "partially resumed flows" following the disruption to the route carrying exports to Yanbu port. The repairs and partial resumption of flows therefore preceded the attacks Investing reported during the week of publication, including the targeting of the Aramco site in the city.
In the United States, the EIA's weekly summary showed commercial crude oil inventories fell by 3.1 million barrels to 412.5 million barrels during the week covered by the report. That total covers commercial inventories excluding the Strategic Petroleum Reserve, the measure the agency uses for the comparison in its summary. According to the agency, those inventories stood 3% below the five-year average, alongside the decline recorded during the week. In spot markets, Brent averaged $114 a barrel in September, according to the agency's October Short-Term Energy Outlook. That average was $23 a barrel higher than in August, placing the rise in futures on the morning of publication in the context of an earlier increase in the average spot crude price between the two months.
Against the backdrop of U.S. policy to expand oil capacity, a presidential memorandum issued in April identified obstacles affecting domestic oil production, refining and related logistics. The memorandum cited financing constraints and long lead times for expanding that capacity among the obstacles facing the sector, alongside permitting and infrastructure bottlenecks. It also cited supply chain constraints, outlining obstacles spanning financing, regulation and the equipment needed for expansion. The memorandum, in turn, listed government purchases and purchase commitments among the support tools available to develop production capacity. The tools also included financial support for that development, with the memorandum providing for "purchases, purchase commitments and financial support to develop production capabilities" among its measures concerning the U.S. oil sector.
Looking ahead, the EIA raised its forecast for the average fourth-quarter Brent spot price to $105 a barrel in its October outlook. The revision represents an increase of $14 a barrel from the previous month's estimate, as part of the agency's oil market outlook. On the weekly U.S. calendar, the regular release of the petroleum inventories report is scheduled for Wednesday at 10:30 a.m. Eastern time, with exceptions for holiday adjustments. The upcoming U.S. events calendar also includes the Federal Reserve's Federal Open Market Committee meeting on October 27 and 28. According to the Federal Reserve's published schedule, the meeting spans two days and includes a press conference.