Oil Extends Rise as Supply Risks Grow, Peace Prospects Dim


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil prices extended their advance Friday (10/23) morning on 
growing risks to Middle Eastern oil supply amid a recent escalation in fighting 
in the region. Brent futures were trading at their highest since early May, and 
were on track for the third consecutive weekly increase.

   By 09:10am ET, ICE Brent for December delivery was up $1.90 to trade near 
$115.07 bbl, and NYMEX WTI for December delivery rose $1.94 to $101.41 bbl.

   Downstream, NYMEX RBOB for November delivery advanced $0.0307 to $3.2072 
gallon, while front-month ULSD futures bucked the trend, retreating $0.0234 to 
$4.9087 gallon.

   The US dollar index steadied, up 0.04 points to 101.48 against a basket of 
foreign currencies.

   Driving the rally was less an acute physical supply disruption but rather 
mounting risks that the current recovery in crude flows from the region is 
standing on shaky ground. While this week's Houthi attacks on key Saudi Arabian 
infrastructure, including an oil field and the vital Red Sea port of Yanbu, 
failed to meaningfully hamper output, the deadly strikes highlighted the 
kingdom's seemingly limited means to protect core assets.

   Adding to the risk premium were signs the U.S. may be preparing for a surge 
in fighting. The U.S. State Department this week issued an evacuation order for 
personnel from Saudi Arabia, and reports suggested that the administration was 
preparing to extend this order to other countries in the region. In addition, 
the New York Times on Wednesday reported that Israel and the U.S. were drafting 
plans for renewed military strikes on Iran following the midterm elections on 
November 3.

   Reciprocal strikes on energy infrastructure in the Russia-Ukraine war also 
continued this week. Russia has since the summer lost a significant portion of 
refining capacity to Ukrainian drone attacks, leading to regional fuel 
shortages and refined product export bans. Reports this week suggested that 
plant operators in Russia were holding off some repair work for as long as 
Ukrainian strikes continued unhindered, increasing the likelihood the global 
diesel crunch may extend far into 2027.

   Despite domestic supply constraints, the first Russian diesel cargo bound 
for the U.S. since the White House waived sanctions on the country and the 
Kremlin in return lifted its diesel export ban departed Friday, according to 
media reports based on ship tracking data, and is expected to arrive in the 
U.S. in two weeks.




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