WTI Crude Tops $100 After Reported Attack on Saudi Refinery
Key Facts
West Texas Intermediate crude rose above $100 a barrel on Wednesday, October 28, after a reported attack on a Saudi refinery revived concerns about supply disruptions in the oil market. The Houthis said they had targeted Saudi Arabia’s largest oil refinery with a missile; the refinery has capacity of 550,000 barrels a day. Saudi authorities did not immediately confirm the attack, Reuters reported. Crude rose after prices fell nearly $2 on Tuesday, when talks in the Middle East helped ease supply concerns. The market thus moved quickly from pricing in the atmosphere around the talks to absorbing the possibility of renewed escalation and its risks to oil flows.
Alongside the security developments, prices received support from preliminary signs of a contraction in U.S. crude inventories. Data from the American Petroleum Institute, according to market sources cited by Reuters, showed inventories fell by 2.03 million barrels in the week ended October 23. The result ran counter to forecasts by analysts surveyed by Reuters for an increase of 15,000 barrels. If confirmed, the inventory decline would bolster the picture of crude demand compared with earlier estimates for the same week. The figures remain preliminary, while traders await the government inventory data due next, according to the report’s context.
ING commodity analysts said the market was pricing in a greater likelihood of renewed escalation, while awaiting clarity on U.S. President’s next move toward Iran. The assessment puts the course of regional risks at the center of price movements, alongside physical indicators from inventories and the reported attack on the Saudi facility. Reuters also reported that output by most of OPEC+’s seven core members was below their production targets. Those members are Saudi Arabia, Russia, Iraq, Kuwait, Algeria, Kazakhstan and Oman. The shortfall against targets adds context to the market’s sensitivity to any development that could raise supply concerns.
On the outlook for supply, OPEC+ producers were expected to keep December production targets unchanged at the following Sunday’s meeting, according to people familiar with the matter cited by Reuters. Meanwhile, traders said Russian crude exports from Baltic Sea and Black Sea ports could fall in the following month. They linked this to domestic refineries increasing diesel production after an agreement with Washington earlier this month. On the risk premium, ING analysts said that if the U.S. midterm elections pass without renewed strikes on Iran, that could be enough to start eroding it. The elections are scheduled for November 3, a date the analysts identified as a watchpoint in their risk assessment.