Oil prices experienced a decline on Monday following a rise to levels close to six-month highs late last week. This drop occurred despite ongoing attacks on Saudi Arabia, which have sustained apprehensions regarding potential supply disruptions. Concerns regarding potential supply disruptions have propelled oil prices upward in the wake of a series of attacks by Iranian-backed Houthi rebels throughout Saudi Arabia, which included strikes on energy infrastructure. US crude futures fell by $1.82, representing a decrease of 2%, settling at $101.48 per barrel, whereas Brent crude futures decreased by $1.50, or 1.72%, to reach $115 per barrel. Both benchmarks had settled nearly $3 higher on Friday following Houthi attacks in Saudi Arabia, which intensified concerns regarding energy supplies. Brent experienced a 6% increase over the week, whereas US West Texas Intermediate saw a rise of 2.3%.
The attacks persisted throughout the weekend, as the Houthis asserted that they had aimed at a Saudi airport and oil facilities on Saturday. On Sunday, Saudi Arabia announced the interception of additional missiles and drones. The world’s largest oil exporter has partially resumed operations at its main airport on Sunday following damage incurred from a previous series of Houthi attacks, despite the group’s commitment to persist in targeting the facility. Last week, Saudi Aramco initiated the evacuation of its headquarters located in Dhahran, adjacent to the Gulf coast and Bahrain, as reported. Hostilities between Saudi Arabia and the Yemen-based Houthis have escalated significantly. Meanwhile, source reported that an oil spill from a tanker was detected off the coast of Umm Al Quwain in the United Arab Emirates, according to the country’s Ministry of Climate Change and Environment. The ministry has not revealed the reason behind the spill, and officials have not yet determined the vessel implicated in the incident.
Clashes between the Houthis and a Saudi-led coalition supporting Yemen’s internationally recognised government have persisted since the Iran-aligned group made advances toward the Bab el-Mandeb Strait last month. The strait serves as a crucial shipping chokepoint at the entrance to the Red Sea. Uncertainty regarding the trajectory of the conflict persists, casting a shadow over the forecast for oil prices. JPMorgan analysts indicated that the future course of the war continues to be challenging to evaluate. At the onset of the conflict, the bank anticipated that the US administration would refrain from surpassing specific economic thresholds. Seven months later, numerous thresholds had been surpassed, yet a definitive exit strategy continued to be unattainable.
The prospect of additional supply disruptions has further solidified anticipations of elevated oil prices. Daan Struyven noted that recent attacks have underscored the potential for shipping disruptions to proliferate and escalate. Goldman Sachs has delineated a scenario where oil prices might ascend to $120 a barrel should hostilities against vessels in the Middle East intensify. In contrast, a reversion to typical export levels may lead to a decline in prices toward $80 a barrel. Struyven noted that shipping risks have emerged as a crucial factor influencing oil prices, further stating that the bank anticipates considerable upside potential for crude. Goldman Sachs anticipates an increase in natural gas and refined fuel prices, noting that supply shocks are likely to exert a more significant influence on gas and refined products compared to crude oil.
