Brent Crude Tops $112 in Five-Month High on Saudi Attacks

Brent crude jumped 3.1% to $112.18 a barrel on Oct. 22, its highest in five months, after another round of attacks in Saudi Arabia stoked fresh supply fears across energy markets. US benchmark West Texas Intermediate rose 2.3% to $99.49. The surge in oil prices put Brent on track for its highest close since May 4.

Yemen's Iran-aligned Houthis struck several targets in Saudi Arabia on Wednesday, including civilian and energy facilities. The attacks sent Brent crude futures up more than 3% in morning trade. Saudi Arabia's civil aviation authority said one person was killed and eight were injured in an attack on King Fahd International Airport in Dammam. Separately, debris from a drone intercepted while targeting the Shaybah oil field killed two people and injured two more, Saudi authorities said. The Houthi attacks followed weeks of escalation around Bab el-Mandeb, a shipping chokepoint at the Red Sea's mouth.

Saudi Aramco told staff to evacuate its headquarters in Dhahran and work remotely as fighting intensified, Reuters reported. The US State Department ordered non-emergency diplomats and their families to leave Saudi Arabia, warning the fighting "has the potential to escalate rapidly." "The safety and security of department personnel and their families remain our highest priority," State Department spokesperson Tommy Pigott said. Dennis Kissler of BOK Financial said most traders are treating the latest action as higher-for-longer for Brent crude prices.

Brent crude climbs on supply fears

The Brent crude rally pushed the contract into technically overbought territory for a third time in a week. "Reports of Middle East crude oil exports exceeding pre-conflict levels are more than countered by attacks on ships in the Strait of Hormuz and the Houthi strikes on Saudi Arabia and on its oil infrastructure," PVM Oil analyst Tamas Varga said. Morgan Stanley estimated Middle East crude exports at about 17 million barrels a day last week, against roughly 18 million a day in the year before the Iran war, according to Kpler.

The escalation also rattled markets on reports that the US and Israel are drawing up plans for renewed strikes on Iran after the US midterm elections on Nov. 3. Iran's Revolutionary Guard Navy said four vessels involved in what it called illegal oil transfers were hit and caught fire, and Iranian media reported explosions of unknown origin in Sirik in southern Iran. Oil prices are resuming their upward climb amid growing signs of renewed escalation, Samer Hasn of XS.com said in a note, after the Houthi attacks on Saudi energy facilities. On Thursday, stocks tumbled as oil spiked: the Dow fell 0.4%, the S&P 500 dropped 0.8% and the Nasdaq slid 1.4% shortly after the open.

Brent crude heads for third weekly gain

Brent crude was on track for a third straight weekly gain, while WTI was headed for its first weekly decline in three weeks. In the US, refiner Valero Energy posted its highest-ever quarterly profit, beating Wall Street expectations, as Middle East disruptions sent refining margins soaring in the third quarter.

Supply concerns also mounted in Libya, where a pipeline valve connecting the Hamada and Tahara oilfields to the Zawiya port was shut, reducing production at both fields, according to the head of the National Oil Corporation. Russia said it was ready to resume US-mediated talks with Ukraine next month, while Ukrainian President Volodymyr Zelenskiy expressed hope that negotiations would take place in early November.

For consumers, the Brent crude spike threatens to feed through to gasoline and diesel. If the economy strains under high oil prices, it is unclear how much the Federal Reserve will keep raising interest rates.