Oil advances as storm, Saudi attacks threaten supply

Oil prices escalated on Wednesday amid concerns over potential supply disruptions stemming from a developing storm in the Gulf of Mexico and intensified attacks by Houthi rebels in Saudi Arabia, despite indications of increased crude deliveries from the Middle East. Brent crude futures climbed 93 cents, or 0.92%, to $101.51 a barrel, while US West Texas Intermediate crude gained 82 cents, or 0.92%, to $90.25.

Forecasts predict the storm could intensify into the first Atlantic hurricane of 2026 within two days, threatening offshore oil and gas facilities and coastal refining infrastructure in the US. Offshore regions susceptible to the storm account for around 15% of US crude production and 5% of natural gas output, making the storm's path crucial for markets.

Chevron initiated evacuations of non-essential personnel from some Gulf of Mexico offshore platforms, maintaining normal production levels at onshore facilities. KCM Trade's chief analyst, Tim Waterer, highlighted the storm as a negative factor for crude, citing possible production and refining disruptions while supply risks remain elevated elsewhere.

Tensions in the Middle East added to support for oil prices; Saudi Arabia's aviation authorities reported attacks on Jazan and Najran airports, with the Houthis claiming missile and drone strikes on King Khalid International Airport in Riyadh, Abha airport, and military installations. Saudi authorities stated that one missile was intercepted, and some Houthi claims remained unverified.

The escalation coincided with Saudi-backed Yemeni government forces' offensive against Houthi positions near the strategically vital Bab el-Mandeb waterway. Saudi air support bolstered concerns that the conflict could jeopardize energy infrastructure or shipping routes. Despite evidence of improving physical supplies from the region, such as Saudi Energy Minister Prince Abdulaziz bin Salman reporting that flows through the kingdom's East-West Pipeline reached 5.8 million barrels per day by Tuesday, OPEC+ producers, including Saudi Arabia, Russia, Iraq, Kuwait, Kazakhstan, Algeria, and Oman, decided to maintain their September production levels for November and continue reviewing market conditions monthly.

The US Energy Information Administration projected Brent crude to average $105 a barrel in the fourth quarter of 2026 and $98 for the year, citing dwindling global inventories and supply disruptions due to Iran-related conflicts. US crude stocks declined by 2.09 million barrels in the week ending October 2, while gasoline inventories fell, and distillate stocks increased.

Higher refining margins persisted due to supply shortages of diesel and other products. Analysts warned that refinery outages or storm-related interruptions along the US Gulf Coast could exacerbate price pressures, even if the developing system only causes temporary production shutdowns.