Oil rebounds after Houthis claim Saudi refinery strike

Oil prices recovered in early Asian trading on Wednesday, October 28, after Yemen's Houthis said they had struck Saudi Arabia's largest refinery. The rebound followed a second straight daily decline, as regional talks in Tehran and comments from Iran's supreme leader had raised hopes that the eight-month conflict could be winding down.

On Tuesday, Brent crude futures fell 1.7% to settle at $113.88 a barrel, and U.S. West Texas Intermediate dropped 1.8% to $99.90, CNBC reported. Early Wednesday, both benchmarks rose more than 1%, according to Reuters, which said the refinery attack had revived worries about Middle East supply risks.reuters.com+1

Diplomacy in Tehran

Saudi Defense Minister Prince Khalid bin Salman met Iranian President Masoud Pezeshkian in Tehran on Monday, and senior military and intelligence officials from Pakistan and Turkey joined the talks, CNBC reported. In a statement, the Saudi Foreign Ministry said the goal was to ease tensions, open channels for negotiation and prevent the conflict from escalating again. According to Iran's state-backed IRNA, the participants agreed to keep talking, AGBI reported.cnbc.com+1

Separately, Supreme Leader Mojtaba Khamenei met top security official Mohsen Rezaei to discuss Iran's conditions for ending the war with the United States. A post on Khamenei's account said the current state of "neither war nor peace" needs to end. It also referred to keeping control over the Strait of Hormuz, CNBC reported. President Donald Trump told Fox News on Sunday that he was close to deciding whether to make a deal with Iran or step up military action.cnbc.com

Strike claim on Ras Tanura

Houthi military spokesman Yahya Saree said on Tuesday that a ballistic missile had hit the Ras Tanura refinery and caused a fire, Reuters reported. The Saudi Aramco facility can process 550,000 barrels per day. Saudi Arabia did not comment on the specific targets. Authorities said they shot down two missiles aimed at Riyadh and three aimed at the Eastern Province, Le Monde reported. The Associated Press said it could not verify the refinery claim. Citing a person familiar with the matter, Bloomberg reported that a fire near the terminal had been contained.reuters.com+2

Nearly all of Saudi Arabia's oil exports leave through Ras Tanura and the Red Sea port of Yanbu, and the Houthis have attacked both before, Reuters noted.reuters.com

Tight inventories

Analysts say supply remains under pressure. Giovanni Staunovo of UBS expects Brent to stay near $110 through the end of the year. He estimates that global inventories have fallen by about 500 million barrels since February, CNBC reported. Separately, OPEC+ is expected to keep its December output targets unchanged at its meeting on Sunday, Reuters reported.reuters.com+1

"Oil prices may also remain higher for longer as inventories first need to be replenished," Staunovo said.