Brent crude futures climbed to 110 dollars per barrel during Friday trading, surpassing that threshold for the first time since May as expectations of near term supply relief faded. The international benchmark contract settled up 3.7 percent at 109.86 dollars per barrel, while West Texas Intermediate gained 3.5 percent to finish at 101.41 dollars per barrel. Over the course of the week, the American crude benchmark advanced more than 10 percent while Brent notched a weekly gain of nearly 5 percent. Rebecca Babin noted that the crude market had to incorporate geopolitical risk back into pricing as trading concluded ahead of the weekend.
According to the U.S. Energy Information Administration, Saudi Arabia and the United Arab Emirates remain the sole OPEC members maintaining notable spare production capacity.
Saudi Arabian defense forces intercepted multiple missiles over the Red Sea on Friday, with one projectile targeted toward the key oil export terminal of Yanbu. Saudi authorities also shot down three armed drones over the capital city of Riyadh and southern regions following repeated assaults by Yemen based Houthi forces. Earlier in the week, an administrative facility belonging to state oil company Aramco in Dhahran was struck on Tuesday. The cross border aerial operations followed an October 10 attack on Riyadh international airport that resulted in 12 deaths and left over 300 individuals injured.
Maritime security conditions in the Strait of Hormuz deteriorated after at least nine tankers and merchant vessels came under attack since Sunday, according to reporting from CNBC. The crew aboard the vessel was safely rescued and evacuated, according to statements released by the Singapore maritime authority. The International Maritime Organization reported that attacks on maritime commerce over the week caused injuries to three seafarers while two crew members remained missing. Crude oil shipments navigating the Strait of Hormuz had previously recovered toward pre war volumes, surpassing 100 million barrels during the prior week.
Saudi Arabia's 1,200km East-West pipeline linking eastern oil fields to the Red Sea port of Yanbu has a maximum capacity of seven million barrels per day, allowing the kingdom to bypass the Strait of Hormuz.
A proposed energy infrastructure ceasefire between Russia and Ukraine brokered by United States President Donald Trump quickly collapsed as Moscow sustained infrastructure strikes. Ukrainian President Volodymyr Zelenskyy pledged to resume retaliatory strikes on Russian petroleum refineries in response to ongoing attacks on domestic facilities. Geopolitical tensions in the refined fuels market mounted following reports of a drone strike on Russia's Ryazan refinery that forced a suspension of operations. United States lawmakers introduced legislation on Friday designed to prohibit any agreement allowing the purchase or release of several hundred million barrels of Russian diesel. The United States administration offered up to 17 million barrels from the Strategic Petroleum Reserve on Friday in an effort to cool retail fuel costs.
The International Energy Agency agreed to release more than 20 million barrels of fuel to address supply pressures.
Average diesel prices across the United States reached 6.33 dollars per gallon on Friday, rising more than 70 percent above levels recorded a year earlier. Diesel futures in New York settled at 4.90 dollars per gallon, with contracts for both diesel and gasoline changing hands at record seasonal highs. Crude oil prices have gained more than 75 percent over the current year as concurrent conflicts across the Middle East and Eastern Europe disrupted global logistics. Daan Struyven pointed out that recent naval hostilities demonstrate how logistics bottlenecks across international waterways can quickly spread and intensify. Goldman Sachs projected that international crude prices could climb to 120 dollars per barrel if attacks against Middle Eastern commercial shipping continue to expand. Eurasia Group analysts raised their estimated probability of wider regional escalation to 65 percent from 35 percent.
