Oil climbs after drone strike kills two at Saudi oil field

Oil prices climbed in post-settlement trading on Wednesday, Oct. 21, after a drone attack on Saudi Aramco's Shaybah oil field killed two workers. The attack added to concerns that fighting in the Middle East could cut supply. Bloomberg reported that Brent moved back above $110 a barrel and West Texas Intermediate climbed toward $98 after a volatile session. Even so, Saudi officials said the attack did not affect production.bloomberg.com

The rise came after a day of swings. Brent settled almost unchanged at $108.82 and WTI ended 67 cents lower at $97.15, according to Reuters reporting. Both benchmarks had gained more than $2 earlier in the day before signs of progress toward Russia-Ukraine peace talks pulled them back.aa.com.tr

Attack at Shaybah

An Energy Ministry official said air defenses intercepted a drone on Wednesday morning as it tried to hit a facility at Shaybah in the Eastern Province, according to the Saudi Press Agency. Falling debris set fire to a contractor's vehicle outside the facility's perimeter. A Filipino and a Nepali national were killed, and a Pakistani and an Indian national were injured. Shaybah can produce 1 million barrels of crude a day, and its operations were unaffected, Bloomberg reported.bloomberg.com+1

No group immediately claimed the Wednesday strike. However, Yemen's Iran-backed Houthis have stepped up attacks on the kingdom, AP reported. The Houthis had claimed attacks on Monday on an Aramco site in Yanbu, on the Shaybah field and on airports in Riyadh and Abha, according to Reuters. Bloomberg also reported that the US has ordered some personnel and family members to leave American embassies in Saudi Arabia.apnews.com+1

Hormuz and Iran tensions

Tensions with Iran also lifted prices. Parliament Speaker Mohammad Bagher Ghalibaf said Tehran would not trust Washington until the US met Iran's conditions for reopening the Strait of Hormuz, Anadolu Agency reported. Iran's Revolutionary Guard said a supertanker had struck a sea mine south of the strait. Kpler data showed at least 18 attacks on vessels over the past two weeks, and LSEG analysts warned that Iran was targeting tankers as far away as the Gulf of Oman, Reuters reported.aa.com.tr+1

Falling US stockpiles

US data pointed to tighter supply as well. Commercial crude inventories fell by 3.1 million barrels to 412.5 million in the week ended Oct. 16, the third straight weekly drop, according to the Energy Information Administration as reported by MarketWatch News Corp ↘ 0.37%. Stocks are now about 3% below the five-year average. Distillate stocks, however, rose unexpectedly.marketwatch.com

The prospect of a Russia-Ukraine deal is pulling prices the other way. "A peace deal between Ukraine & Russia could unlock the tight global diesel supplies that have been a major contributor to the crude bulls the past few weeks," BOK Financial's Dennis Kissler said, according to Reuters.globalbankingandfinance.com