Oil Slips From Five-Month High as Middle East Crude Supply Holds Near Prewar Levels
Summary
- International oil prices, including Brent crude and WTI, retreated from a five-month high as supply held steady despite military clashes in the Middle East.
- Brent crude has risen about 80% this year on supply concerns tied to the Middle East conflict and the Russia-Ukraine war, and is projected to fluctuate at around $100 a barrel.
- Continued attacks on energy infrastructure and ships are heightening concerns over crude supply disruptions and the risk of higher oil prices.
Forecast Trend Report by Period
International oil prices fell from a five-month high as crude supply from the Middle East stayed close to prewar levels despite escalating military clashes in the region.
Bloomberg reported on October 18 that Brent crude, the global benchmark, traded below $109 a barrel. That gave back part of the gains after it surged about 4% on October 16. West Texas Intermediate traded around $101 a barrel.
Attacks involving oil shipments and energy facilities have continued across the Middle East. A Saudi helicopter crashed near the Saudi Arabia-Yemen border, and Yemen's Houthi rebels attacked Yanbu, a key crude export hub. There were also reports that two tankers were attacked in the Persian Gulf.
Even so, oil transport has held at a certain level. The U.S. government said more than 100 million barrels of crude passed through the Strait of Hormuz last week with escort support from the U.S. military. That indicates Middle East oil supply has not suffered a full-scale disruption, easing some of the upward pressure on prices.
Brent has climbed about 80% this year on supply concerns tied to the Middle East conflict and the Russia-Ukraine war. Jun Goh, a senior oil-market analyst at Sparta Commodities, expects Brent to fluctuate around $100 a barrel as geopolitical risks coincide with increased Middle East crude shipments. He said the market is finding it difficult to absorb further oil-price gains as the global economic outlook remains weak.
At the same time, continued attacks on energy facilities and ships are also raising the possibility of further gains in oil prices. Jorge Leon, head of geopolitical analysis at Rystad Energy, said the increase in attacks on energy infrastructure and vessels is weakening expectations for a sustained recovery in crude supply. In his view, the market is pricing in the possibility of prolonged supply disruptions, leaving the risk tilted toward higher prices.
