Oil prices gain on attacks in Saudi Arabia, Iran's new tactics to target tankers
Gasoline prices are seen at a Shell gas station in Houston, on Oct. 2. AFP-Yonhap
NEW YORK — Oil prices rose on Wednesday after the Houthis attacked Saudi Aramco's headquarters and Iran said it was deploying new tactics to target ships and keep oil prices high.
Brent crude futures were up 87 cents, or 0.82 percent, at $106.56 a barrel by 1:25 p.m. ET (1725 GMT). U.S. West Texas Intermediate crude gained $1.46, or 1.55 percent, to $95.60, touching a three-week high.
Attacks on ships transiting the Strait of Hormuz and strikes between Saudi Arabia and the Iran-allied Houthis are driving up oil prices, said Phil Flynn, senior analyst with the Price Futures Group. "We're seeing a lot of fear trade today," he added.
Iranian officials declined to provide details of the new strategy to target ships, but one said Iran had started using different offensive tactics about 10 days ago.
Gulf oil flows excluding Iran surged in September to more than 81 percent of prewar levels, data showed, led by a recovery in Saudi exports. Iranian exports fell to zero owing to a U.S. blockade.
"More crude reaching international markets does not necessarily mean more oil is being produced," Saxo Bank analyst Ole Hansen said in a note. "Some of the recovery reflects a redistribution of available barrels, including volumes that would otherwise have supplied regional refineries."
Attacks on multiple fronts
The Houthis attacked an administrative building belonging to state-owned oil company Saudi Aramco in the city of Dhahran, causing a limited fire, Saudi Arabia's energy ministry said.
The group has fired ballistic missiles and drones at Saudi Arabia over the past week in what it says is retaliation for the kingdom's support of Yemeni government forces. Riyadh's international airport has been hit four times, with a strike on Saturday killing 13 people.
Meanwhile, a container ship sank in waters south of the Strait of Hormuz after hitting a naval mine and catching fire, Iran's Revolutionary Guards Navy said in a statement shared by state media on Wednesday. This was a day after the United Kingdom Maritime Trade Operations said a container ship and a tanker were hit by unknown projectiles within the strait.
"The expectation that increased Russian diesel exports will ease market tightness is likely to limit sharp price movement in either direction," said Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment.
U.S. President Donald Trump announced on Friday that Russia had agreed to supply diesel to global markets and his administration temporarily lifted U.S. sanctions on Russian diesel that were designed to deprive Moscow of revenue for its war in Ukraine.
Russia's crude oil production increased by 65,000 barrels per day in September to 8.43 million bpd but remained down 870,000 bpd year over year, the International Energy Agency said on Wednesday.
The IEA also said a lack of operational Russian refinery capacity meant that the recently announced easing of Russian diesel export restrictions was unlikely to bring any material change to the global gasoil market balance.
Constrained diesel supplies could persist well into next year, the IEA said.
The oil market was watching for weekly storage reports from the American Petroleum Institute trade group on Wednesday and the U.S. Energy Information Administration on Thursday, a day later than usual due to a holiday on Monday.