Oil prices rose on Thursday after Iran-aligned Houthis said they attacked “Saudi deployments” in Yemen, ramping up concerns about Red Sea shipping, while hopes around Iran-Oman talks to restore flows via the Strait of Hormuz helped cap gains.
Brent crude futures gained $1.74, or 2.19%, to $81.19 a barrel by 10:59 a.m. EDT (1459 GMT). U.S. West Texas Intermediate futures rose $1.40, or 1.86%, to $76.62.
Yemen’s Houthis said they carried out missile and drone attacks on “Saudi deployments” in Marib and Hadramout in Yemen on Thursday, and that they killed or wounded hundreds of Saudi-aligned fighters, and destroyed military camps, weapons depots and vehicles.
“The market is going up and down as tensions rise and fall and of course these attacks are a significant development because it is more activity in the other theatre, away from the Persian Gulf, and is a reminder that the Red Sea passageway could still be in jeopardy,” said John Kilduff, partner at Again Capital.
Iran and Oman have reached an understanding on the geographic coordinates for a shipping route through the Strait of Hormuz and a joint announcement is being finalised, provided certain third parties do not interfere, Iran’s Foreign Ministry spokesperson Esmaeil Baghaei said on Wednesday.
“Traders still remember the short-lived Memorandum of Understanding signed in June, so there is understandable anxiety that any new deal could prove equally fragile,” said Tim Waterer, chief market analyst at KCM Trade.
“Until we see sustained, verifiable increases in volumes, the market will continue to price in a degree of supply risk,” Waterer added on the topic of Hormuz flows.
A proposed deal between Iran and Oman to help end the U.S.-Iran conflict would give Tehran control over ships entering the Gulf through the strait, a senior Iranian source and two regional officials told Reuters on Wednesday, one of the biggest concessions yet to Iran.
“Crude traders remain focused on the U.S./Iran agreements, and the longer the delays, the more prices will fade back to the upside,” said Dennis Kissler, senior vice president of trading at Bok Financial.
Before the conflict began in late February, about one-fifth of global daily oil and liquefied natural gas supplies flowed through the Strait of Hormuz.
Geopolitical risks persist
Gulf countries’ crude oil and condensate exports were largely steady in July and remained about 40% below pre-war levels, shipping data showed.
Iran has warned Gulf states that any new U.S. attack on its territory would trigger retaliation against critical energy infrastructure across the region, according to five sources, as Tehran seeks to raise the cost of military action by threatening Washington’s closest regional allies.
Yemen’s Iran-aligned Houthis said on Wednesday they had launched a missile attack on a Saudi oil tanker off the coast of the kingdom’s Red Sea port city of Yanbu and another missile attack on a Saudi oil tanker in the nearby Gulf of Aden. There was no confirmation from Saudi Arabia on either incident.
“Houthi attacks so far have not significantly disrupted oil and gas supply but this might change if attacks escalate further,” said Roberto Cominotto, equity research analyst at Julius Baer.
Saudi Arabia has slightly lowered the official selling price for its flagship Arab Light crude oil to Asia in September, a pricing document reviewed by Reuters showed.
Elsewhere, a major oil refinery in Russia’s Yaroslavl region is on fire after a big Ukrainian drone attack and emergency services are working to put out the blaze, Mikhail Evrayev, the regional governor, said on Thursday.
Source: Khaleej Times