Oil holds biggest gain in week as Saudi attacks fan supply risks

Oil prices surged to their highest level in nearly two weeks after deadly attacks in Saudi Arabia increased fears of potential supply disruptions. Brent crude rose 4% to near US$113 a barrel, while West Texas Intermediate closed above US$99. The attacks, carried out by Yemen’s Houthi rebels and Iranian-backed groups, heightened concerns that escalating Middle East hostilities could negatively impact oil supplies.

Despite the drone strike on Saudi Aramco’s Shaybah field causing no operational disruption, an attack on King Fahd International Airport in Dammam resulted in casualties. The US responded by ordering the departure of some personnel and family members from American embassies in the kingdom. However, oil briefly retreated from intraday highs in New York as concerns about equity market volatility deterred investors from taking on additional risk.

Global crude exports have climbed to pre-conflict levels, with tankers evading detection by turning off their transponders; yet, shipments of oil products remain constrained. Iran has intensified attacks on shipping in the Strait of Hormuz, while Tehran-backed Houthi militants have frequently targeted Saudi Arabia. Speculation surrounding potential US and Israeli strikes on Iran in the near future following the upcoming American midterm elections has contributed to the market's cautious sentiment.

Despite the oil-product flows from the Gulf increasing, security risks persist, with Iran's Islamic Revolutionary Guard Corps accusing the US of violating maritime regulations. Meanwhile, governments are drawing from reserves to address tightness in oil-product supplies, and US President Donald Trump is advocating for measures to alleviate prices before the midterm elections, including a diesel deal with Russia.