Oil prices experienced a decline on Monday, influenced by increased crude exports from the Middle East and the Group of Seven nations’ intentions to release oil stocks, which contributed to supply levels. This occurred despite ongoing concerns regarding the potential for additional damage to Gulf oil infrastructure in the context of the Iran war. Brent crude futures declined by 70 cents, representing a decrease of 0.69%, settling at $101.60 per barrel. Meanwhile, US West Texas Intermediate crude was priced at $90.15 per barrel, down by 90 cents, or 1.07%. The release of stocks will occur alongside an increase in Middle Eastern crude exports. Shipping data reported indicated that exports surpassed pre-war levels on four of the seven days during the last week of September, even in the face of attacks on vessels navigating the Strait of Hormuz.
The increase in available supply has contributed to maintaining downward pressure on prices, although the risk of additional harm to energy infrastructure throughout the Gulf persists. The Houthis announced the launch of ballistic missiles and drones targeting Saudi Aramco facilities in Riyadh and the Khurais region of Saudi Arabia. They claimed these attacks were a reaction to 50 air and missile strikes conducted by Saudi-led forces in Yemen within the preceding 12 hours. Saudi Arabia has yet to provide confirmation regarding the attacks. Yemen’s Saudi-backed, internationally recognised government announced on Sunday its initiation of a significant military campaign aimed at reclaiming all territories within the country that are under the control of the Iran-backed Houthis. Meanwhile, Aramco unexpectedly reduced its November crude oil prices for Asia to levels not seen in six years.
“We simply don’t know how to model the endgame,” analysts stated, highlighting the uncertainty surrounding the potential evolution of the conflict. When the war began, the bank had assumed there were economic thresholds that the US administration would not cross. Six months into the conflict, JPMorgan indicated that several of those thresholds had been crossed, yet a clear exit strategy remained elusive. The threat of further supply disruptions has also heightened the likelihood of elevated oil prices. Daan Struyven stated that recent attacks have illustrated the potential for disruptions to shipping to proliferate and intensify.
Goldman Sachs has delineated a scenario wherein oil prices might ascend to $120 a barrel should assaults on vessels in the Middle East escalate. If exports return to normal, the bank anticipates that oil prices will trend back toward $80 a barrel. Struyven indicated that shipping risks have emerged as a significant factor influencing oil prices. Goldman Sachs anticipates “meaningful upside to crude oil prices” and also projects an increase in natural gas and refined product prices. Struyven noted that supply shocks in petrol and fuels are more significant than those observed in the crude market.
