Oil reached $110 per barrel amid concerns that escalating tensions in the Middle East could further constrain supply
Driven by supply concerns stemming from the Middle East and Russia, the price of oil hit $110 per barrel. The United States announced that it would release 17 million barrels of crude oil from its emergency reserves into the market via an exchange mechanism. Meanwhile, investors are assessing the potential volume of diesel that Russia might be able to supply to the global market.
Brent crude futures closed at $109.86, up $3.94 (3.7%), marking their highest level since May 19. WTI crude futures rose by $3.44 (3.5%) to reach $101.41, the highest level seen since September 17.
Over the course of this week, Brent crude gained 4.9%, while WTI rose by 10.4%.
A coalition led by Saudi Arabia announced that it had intercepted and destroyed a ballistic missile launched toward Yanbu. As tensions flared once again following reports of attacks on Saudi energy infrastructure, both WTI and Brent crude prices recovered from earlier losses.
Unusual military activity, detected by Western intelligence, has fueled speculation that Iran may be preparing for a preemptive strike. Although unconfirmed, these developments reinforce the view that ongoing geopolitical risks will continue to support oil prices.
Sources have reported that a ballistic missile launched toward the Red Sea city of Yanbu was intercepted and destroyed. This port is of critical importance to Saudi Arabia’s efforts to maintain oil shipments to international markets by bypassing the Strait of Hormuz.
Supply concerns have intensified following an uptick in attacks around the Strait of Hormuz over the last 10 days. Iran has stated that it has stepped up these attacks in response to a blockade imposed by the U.S. on its ports, as well as tougher sanctions that came into effect last month.
Iran’s intensified offensive has led to a sharp decline in crude oil shipments from the Gulf. Unless a comprehensive political agreement is reached, any recovery in shipments through the Strait of Hormuz is expected to be slow and erratic.
On Thursday, Ukraine launched an attack on a Russian oil refinery. This development follows President Zelenskyy’s announcement that Kyiv is abandoning a proposed ceasefire, which had been floated by Donald Trump and would have included energy facilities, and his criticism of Trump’s apparent willingness to strike deals with Moscow.
According to sources, the Ryazan oil refinery in Russia halted operations at its primary crude distillation unit following a drone attack in the region on Thursday.
There is also uncertainty regarding the actual volume of diesel fuel that Russia will be able to supply to the markets. These developments are prompting investors to remain on the buying side.
The International Energy Agency (IEA) reached an agreement on Thursday to release more than 20 million barrels of fuel into the market with the aim of increasing supply.
The U.S. Department of Energy announced on Friday that it has issued a call for bids to release up to 17 million barrels of crude oil from the nation’s Strategic Petroleum Reserve (SPR) through an exchange mechanism.
Previously, Washington had agreed to release 172 million barrels of oil from its own strategic reserves as part of a broader agreement with approximately 30 other member countries of the International Energy Agency (IEA), which entails releasing a total of 400 million barrels of oil from reserves worldwide.
While Brent crude prices saw little change on Thursday, U.S. West Texas Intermediate (WTI) crude gained more than 3%. This rise was driven by reports that the U.S. plans to ease restrictions on the so-called "shadow fleet" of tankers, as well as a significant drop in U.S. crude oil inventories resulting from production halts caused by hurricanes.
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