Oil prices experienced an uptick on Wednesday as traders assessed the likelihood of supply disruptions stemming from a storm approaching US oil-producing regions, alongside attacks by Yemen’s Iran-backed Houthis on Saudi Arabia, in contrast to increasing shipments of Middle East crude. US forecasters indicated on Tuesday that a storm forming in the Gulf of Mexico is projected to evolve into the first Atlantic hurricane of 2026 within a two-day timeframe, potentially impacting oil and gas production facilities. The offshore regions within the storm’s anticipated trajectory represent 15% of the United States’ crude oil production and 5% of the nation’s natural gas output. Brent futures increased by 93 cents, or 0.92%, reaching $101.51, whereas US West Texas Intermediate crude saw a rise of 90 cents, or 1.01%, settling at $90.30 a barrel. Meanwhile, oil supplies have been on the rise, with the East-West pipeline achieving a throughput of 5.8 million barrels per day, as stated by Saudi Energy Minister Prince Abdulaziz bin Salman on Tuesday.
Approximately 12 million barrels per day of crude oil and 2 million barrels per day of refined products have been transported from the Middle East by tankers in the last 7 to 10 days, as reported. Simultaneously, regional tensions have escalated. On Monday evening, the Saudi aviation authority reported that the airports in Jazan and Najran were subjected to two attacks, coinciding with an escalation in hostilities between Saudi Arabia and the Iran-backed Houthis of Yemen. The attacks occurred concurrently with the intensified offensive by Saudi-backed Yemeni government forces aimed at regaining territory from the Houthis, following a series of advances by the rebels, while Riyadh augmented its airstrikes to bolster the campaign. Attacks and refinery outages are expected to sustain elevated crack spreads, with the resulting scarcity likely to impact crude prices.
Relations between the US and Iran exhibited minimal indications of enhancement. US President Donald Trump remarked on Tuesday that there was a lack of clarity regarding who was in control of Iran during the eight-month conflict involving the US and Israel against Iran. Their leaders are gone, their second group of leaders are gone, and the biggest problem I have is nobody knows who the hell is running the country,” Trump stated. Iran’s foreign ministry spokesman stated on Sunday that Washington is well aware of its counterpart in Iran and comprehends the workings of the country’s decision-making system. JPMorgan analysts indicated that the resolution of the conflict is challenging to evaluate, highlighting the ambiguity surrounding potential developments in the situation. When the war commenced, the bank had presumed that there existed economic thresholds that the US administration would refrain from crossing.
Six months into the conflict, JPMorgan indicated that several of those thresholds had been crossed, yet a clear exit strategy remained elusive. The risk of further supply disruptions has also heightened the likelihood of elevated oil prices. Daan Struyven indicated that recent attacks have demonstrated the potential for shipping disruptions to proliferate and intensify. Goldman Sachs has delineated a situation where oil prices might escalate to $120 a barrel should assaults on vessels in the Middle East become more pronounced. 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 significant potential for an increase in crude prices, while also projecting a rise in natural gas and refined product prices. Struyven noted that supply shocks in petrol and fuels surpass those observed in the crude market.
