Oil prices climb as traders weigh Saudi supply risk, Russian diesel flow

Oil prices rose on Wednesday as traders considered the risk of supply disruption from the fighting between Yemen's Iran-allied Houthis and Saudi Arabia, alongside the possibility of increased Russian diesel exports. Brent crude futures increased 89 cents, or eight-tenths of a percent, to $106.58 a barrel, while US West Texas Intermediate crude futures gained 80 cents, or nine-tenths of a percent, to $94.94.

Brent's price fell 0.9 percent on Tuesday, while WTI rose 0.4 percent. Supply concerns stemming from the conflict are driving prices higher, said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment. However, the expectation of increased Russian diesel exports is likely to prevent sharp price movements in either direction, projecting WTI to trade between $90 and $100 a barrel.

The Houthis attacked an administrative building belonging to Saudi Aramco in Dhahran, causing a limited fire. The group has fired ballistic missiles and drones at Saudi Arabia in retaliation for the kingdom's support of Yemeni government forces. Four times, Riyadh's international airport has been hit, with a strike on Saturday killing 13 people.

Recently, Saudi Arabia raised oil production, even with disruption from the US-Iran war, leading to a significant increase in OPEC+ production. Iran is using new tactics to target ships in the Strait of Hormuz to maintain high oil prices and influence the US midterm elections. In Russia, the government stated they see no direct link between peace talks with Ukraine and their deal to export diesel to the US.

This comment was made after Reuters reported that US envoys informed Ukrainian officials that the deal was a part of an attempt to draw Russia back into negotiations for a peace settlement.