Oil prices rise as traders weigh Middle East shipping and supply risks

Oil prices edged higher early on October 21 as traders weighed shipping and supply risks in the Middle East. Brent crude futures rose 85 cents, or 0.78%, to $109.64 a barrel at 0022 GMT, while US West Texas Intermediate crude rose 76 cents, or 0.78%, to $98.58, Reuters reported. The gains followed a decline in the previous session as traders assessed prospects for diplomacy.

Reuters linked the latest rise to concerns about Red Sea shipping and threats to oil infrastructure in Saudi Arabia. The risks matter to traders because attacks on vessels and oil facilities can disrupt the movement of crude, even as the scale of any resulting supply loss remains unclear.

Tanker attacks and Saudi oil sites in focus

Iran’s Revolutionary Guards Navy said a supertanker caught fire after striking a sea mine south of the Strait of Hormuz while violating Iranian regulations, according to Iranian media cited by Reuters. CNBC separately reported that Iran’s Revolutionary Guard Corps said two oil tankers had caught fire after hitting mines in the strait. Those are attributed accounts of the incidents, rather than independently established findings about what happened.

The Houthis claimed responsibility on Monday for attacks on a Saudi Aramco site in Yanbu, the Shaybah oilfield and airports in Riyadh and Abha, Reuters reported. The claims added to traders’ concern about Saudi infrastructure; Reuters did not quantify any resulting loss of oil supply.

Prices rebound after Tuesday’s decline

On Tuesday, Brent settled at $108.79 a barrel, down 76 cents or 0.69%, after reaching $111.99 during the session. The November WTI contract fell $1.87, or 1.8%, to $101.79 before expiring that day. CNBC reported that traders had hoped for diplomatic progress between the United States and Iran, despite the recent escalation in tanker attacks and strikes against Saudi Arabia.

Reuters reported that Tuesday’s price decline followed a meeting in Tehran at which Iran’s president discussed mediation efforts with Pakistan’s army chief. Iranian Foreign Minister Abbas Araqchi said in a television interview aired Tuesday that Iran had received no response from Saudi Arabia or the Houthis to its offer to help broker peace talks.

Tamas Varga, an analyst at PVM Oil Associates, told CNBC that strength in the expiring WTI contract reflected tightness in the global crude market. He pointed to falling Middle East export volumes amid tanker attacks and Houthi strikes, as well as expectations that US commercial crude stocks had declined. Separately, two US Energy Department officials said they were working with refiners worldwide to increase fuel output amid a diesel shortage and higher prices, Reuters reported.