Brent rises 1.4% to $115.47 as Saudi supply concerns return
Key Facts
Brent crude futures rose $1.59, or 1.4%, to $115.47 a barrel at 0435 GMT on Oct. 28, while West Texas Intermediate rose $1.43, or 1.4%, to $101.33, according to Reuters. The gains came as supply concerns returned after the Houthi group said it had targeted the Ras Tanura refinery in eastern Saudi Arabia with a ballistic missile. The Associated Press said the claim could not be verified and that Saudi Arabia had not commented on it. Saudi authorities had not confirmed an attack at the time Reuters published its report. EL7 data showed Brent closed at $115.4 on Oct. 28, compared with $113.88 in the previous session.
Saudi authorities said air defenses intercepted and destroyed two ballistic missiles launched toward Riyadh and three missiles launched toward the Eastern Province on Tuesday, Oct. 27. The Associated Press said debris from the two missiles intercepted over Riyadh fell on a building, a construction site and a vehicle, causing damage. Saudi authorities had not confirmed the group's claim about the Ras Tanura refinery at the time. The refinery has capacity to process 550,000 barrels a day, according to a Reuters report, making it a major facility in Saudi Arabia's refining sector. The developments put a Saudi oil facility at the center of market concerns, but the account of an attack on the refinery remained unverified.
Wednesday's rise followed a decline of about $2 on Tuesday, when Middle East talks helped ease supply concerns, according to Reuters. Reuters said prices were rebounding as concern returned after the claim of an attack on the refinery. The ING strategy team described prices as still elevated and said the market was waiting for greater clarity on U.S. President Donald Trump's next move toward Iran. The team added that the market was pricing in a greater likelihood of renewed escalation, while the next U.S. move remained uncertain. The Associated Press also noted that attacks on Saudi oil facilities and infrastructure had helped lift global energy prices.
On inventories, U.S. crude stocks fell by 2.03 million barrels in the week ended Oct. 23, according to American Petroleum Institute data cited by market sources reported by Reuters. That ran counter to a Reuters poll forecast for an increase of about 15,000 barrels over the same period. The U.S. Energy Information Administration's official weekly inventory report was expected later on Oct. 28. Attention therefore turned to the official reading after an initial estimate showed a draw in stocks rather than the slight increase expected. The market is watching the data as supply concerns return to price movements.
Traders are due to follow Sunday's OPEC+ meeting, where producers were expected to keep December output targets unchanged, according to people familiar with the matter cited by Reuters. On Russian supply, traders told the news agency that crude exports from Baltic and Black Sea ports could fall in the following month as domestic refineries increase diesel production. The ING strategy team said the risk premium could begin to ease after the elections if strikes on Iran do not resume. The team put it this way: "If we get through the elections without fresh strikes on Iran, that could be enough to start eroding the market's risk premium." Production and export developments add to the OPEC+ meeting and inventory data as factors the market is monitoring after the recent rebound.
The market's sensitivity to Gulf risks is linked to the importance of the Strait of Hormuz to energy flows; before the war, about one-fifth of global oil supplies passed through it, according to an Associated Press report published in September. Lloyd's List Intelligence counted 90 vessels passing through the strait in the first week of September, compared with about 130 vessels a day before the war. These figures provide context for the waterway's role in supply calculations, while developments in Saudi Arabia, U.S. data and the producers' meeting are near-term events for the market to watch. OPEC+ producers meet on Sunday to discuss December output targets, while the U.S. Energy Information Administration report was expected later on Oct. 28. The ING team tied the impact on the risk premium to whether strikes on Iran resume after the elections.