Brent crude jumps, settles up over US$3 after tanker attacks

Brent crude prices surged over US$3 per barrel on Thursday, November 5, following a series of tanker attacks in the Middle East. This rise in price occurred as investors grew anxious about potential supply disruptions and the ongoing conflict between the United States and Iran. The Brent futures closed at US$98.29 per barrel, marking a 3.88% increase from the previous day. Concurrently, US West Texas Intermediate crude prices rose by 2.72%, settling at US$90.52 per barrel.

This turnaround from the previous day's sharp decline of more than 8% in both benchmarks was primarily attributed to concerns over the speed at which oil flows could normalize, compounded by the uncertainty surrounding diplomatic progress. Gelber and Associates noted this in their analysis that day. Andy Lipow, president of Lipow Oil Associates, emphasized ongoing worries within the oil market due to reports of tankers being struck by mines or targeted by drones in the region.

Reports indicate that tanker incidents have reached near-record levels, with at least five vessels affected since Sunday, according to the UK maritime security agency UKMTO.

The recent escalation of tensions between the United States and Iran, which began in February under President Donald Trump's administration, has had a significant impact on global fuel prices. These price surges have been a major concern for voters, contributing to Democrats' gains in the recent midterm elections. The new Democratic-controlled Congress is set to take office in January, potentially altering the geopolitical landscape.

Citi analysts expressed concern that with the midterms concluded, the White House may shift focus toward executive foreign policy actions, possibly escalating the war with Iran. However, Eurasia Group, a geopolitical risk consultancy, revised its estimates regarding the likelihood of renewed US strikes on Iran, reducing the probability from 65% to 60%.

Additionally, they lowered the chances of resolving the conflict to 10% from 20%, as Iran has remained firm in its demands for President Trump's participation in any negotiations. Despite the recent decline in oil prices, Eurasia Group projected that renewed conflict could push Brent crude prices into a range of US$110 to US$125 per barrel.

Meanwhile, the Iranian foreign ministry announced that Foreign Minister Abbas Araqchi had discussed "latest progress" in diplomatic efforts aimed at ensuring regional stability during calls with his Saudi and Qatari counterparts. Saudi Arabia, the world's largest oil exporter, issued warnings of potential danger in Yanbu, its key Red Sea oil export hub, due to persistent attacks by Yemen's Iran-aligned Houthi rebels.

The Houthis later claimed responsibility for an attack on King Fahd airport in Dammam, though Saudi officials have not yet confirmed this incident. Iran's Islamic Revolutionary Guard Corps reported that two oil tankers and a tugboat caught fire in separate incidents while attempting to navigate unauthorized routes through the Strait of Hormuz.

Elsewhere, Ukraine intensified its attacks on Russian oil refineries, raising concerns about Russia's capacity to export diesel under an agreement with the US. The Ryazan oil refinery, one of the largest in Russia, reportedly faced a large drone attack on industrial sites southeast of Moscow, marking the second Russian refinery targeted in a single week, following an attack on the Yaroslavl plant the previous night.