Brent heads for third weekly gain after Houthi attacks

Brent crude held near $113 a barrel on Friday, October 23, a day after a 4% jump to its highest settlement since May 4. Traders were reacting to Houthi attacks on Saudi Arabia and to growing concern that the US and Iran could return to open conflict. The global benchmark was set for a third straight weekly gain, while US West Texas Intermediate was on track to end the week lower after two weeks of gains, Reuters reported. Brent edged lower early in Asian trading, which analysts at UOB put down to a likely technical correction after Thursday's rally, according to The Wall Street Journal News Corp ↘ 0.53%.wsj.com+1

Attacks across Saudi Arabia

On Wednesday, October 21, Yemen's Iran-aligned Houthis struck several targets in Saudi Arabia. At least one person was killed at a civilian airport in Dammam, and two people died in a drone attack on a Saudi oil field. The US then ordered some diplomatic staff to leave the country, Reuters reported. On Thursday, Saudi Aramco ordered the evacuation of its Dhahran headquarters as fighting with the Houthis intensified, according to Reuters.reuters.com+1

"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 told Reuters. He added that no de-escalation is expected before the US midterm elections. Morgan Stanley ↘ 2.44% analysts estimated that Middle East crude exports were around 17 million barrels per day last week. Supply was also hit outside the region: a pipeline valve in Libya was shut, cutting output at two oilfields.reuters.com

Washington and Tehran

ING ↘ 1.85% analysts wrote that the rally reflected supply fears more than current fundamentals. They pointed to reports that President Donald Trump is weighing new strikes on Iran, that a second US aircraft carrier is being sent to the region, and that US troops have been evacuated from some Middle East bases. "If anything, re-escalation seems the most likely path," the bank said. It added that its forecast of an $80 average for Brent in the fourth quarter "is looking unattainable." Iranian officials publicly ruled out talks with Washington, Investing.com reported.think.ing.com+1

European gas follows

European gas prices also rose. The Dutch TTF benchmark settled above 90 euros per megawatt-hour on Thursday, its highest since December 2022, ING noted. It climbed further on Friday and was heading for a weekly gain of nearly 7%, according to Investing.com, which reported that EU storage sits around 75% full, below the late-October average of 86%. Higher oil prices also weighed on gold, which fell to its lowest level since July 20 on inflation worries, Moneycontrol reported.moneycontrol.com+2

ING said that even if tensions do not flare again, "the mere possibility is likely to keep a sizeable geopolitical risk premium embedded in prices."