Oil fell back slightly today, after traders pricing in a geopolitical risk premium from Houthi attacks on Saudi infrastructure and reports of vessel attacks in the Gulf pushed Brent to a five-month high.
Yemen’s Iran-aligned Houthis said yesterday they launched several attacks on Saudi energy, airport and military targets, such as an Aramco site in Yanbu, the Shaybah oilfield, Riyadh’s King Khalid International Airport and Abha airport.
Saudi authorities did not immediately confirm the Houthi claims and Reuters could not independently verify them.
Brent crude futures rose to $111.75 a barrel, the highest since May, and were trading at $111.20, up $1.65 or 1.5% in late morning trade.
However the price eased to $108.70 by evening time.
The November contract for US West Texas Intermediate crude, which expires today, rose as high as $110, the highest since April for a nearby contract, before falling back to $97.87.
“Oil prices remain well-supported. This suggests the market is pricing in a significant risk premium, given the situation’s volatility,” ING analysts said in a note today.
“However, if flows continue uninhibited despite the geopolitical environment, the risk premium would likely erode slowly. Clearly, there are no signs of this yet,” they added.
At least 18 vessels were reportedly attacked over two weeks, which keeps the risk premium intact, shiptracker Kpler said in a note this week.
A Houthi attack on a training camp for government security forces in Yemen’s Shabwa province killed 58 people and injured more than 200 yesterday.
The renewed attacks heightened fears about regional stability and underscored continuing risks to energy supply from the region, keeping oil prices above $100 a barrel.
In the US, analysts expected crude oil stockpiles to have fallen last week along with product inventories, a preliminary Reuters poll showed yesterday.
