Oil prices rose Wednesday with an attack on a Saudi Aramco building and fresh strikes on tankers around the Strait of Hormuz fueling concerns about supply risk in the Middle East.
December Brent crude futures rose 0.4% to $106.06 a barrel, and West Texas Intermediate crude for November delivery rose 1% to $95.09 a barrel.
Regional tensions remained high after Iran-backed Houthi militants hit a building at the headquarters of state oil company Saudi Aramco in the eastern city of Dhahran. Saudi Arabia's Energy Ministry said the strike caused a limited fire but no casualties.
The Wall Street Journal, citing people familiar with the matter, said the building suffered extensive damage after the missile strike caused a fire that spread to several floors and led parts of the roof to collapse.
Shipping risks remained high. U.K. Maritime Trade Operations reported another tanker strike in the Strait of Hormuz Tuesday, following a series of attacks on commercial vessels in recent weeks. Tanker shortages and elevated freight rates have also weighed on Gulf crude exports, which slowed in early October and weakened further last week, analysts at ANZ Research said.
Despite the continuing shipping risks, crude oil continued to flow through the waterway. U.S. Central Command said Tuesday that American forces had assisted Gulf partners in shipping more than 19 million barrels of crude through the Strait of Hormuz on Monday. The command also rejected an Iranian military claim that Tehran controlled the waterway.
"The oil getting out is not the same as supply returning to normal," said Aarathi Krishnan, chief executive of geopolitical risk firm Raksha Intelligence Futures. "The market is balancing, recovering volume, but it's still keeping risk premium in prices."
In its latest monthly report Wednesday, the IEA said global oil supply increased by 2.5 million barrels a day to 102.3 million barrels a day in September, driven by higher output from Persian Gulf producers, particularly Saudi Arabia and the United Arab Emirates. However, Gulf crude exports remained below prewar levels, and renewed attacks on energy infrastructure and tankers threaten the recovery, the agency said.
The IEA also lowered its global oil-demand outlook, forecasting a decline of 2.6 million barrels a day this year to 102.4 million barrels a day, reflecting high energy prices and the economic fallout from the conflict. Despite weaker consumption, the agency expects oil markets to remain in deficit through the end of 2026, with tight diesel supplies likely to persist well into next year.
While tanker companies are becoming more skilled at using ship-to-ship transfers to export crude via the Strait of Hormuz, a firm supply recovery to pre-war levels hinges on a durable diplomatic settlement between the U.S. and Iran, Raymond James investment strategy analyst Pavel Molchanov said.
"Until then, we see 80%-85% as the maximum realistic run-rate," he added.
High shipping costs are also influencing oil-price forecasts. Morgan Stanley raised its Brent forecast for the fourth quarter to $105 a barrel from $100, citing tight supplies, geopolitical risks and higher freight costs. The bank said shorter shipping distances to European markets favor Brent, while crude from Brazil, West Africa and the U.S. has become less competitive because of higher freight costs. It also raised its first-quarter 2027 Brent forecast to $100 a barrel from $95.
War-risk insurance and shipping disruptions are keeping prices up, said Krishnan of Raksha Intelligence Futures. "That's not going to come down in one or two weeks. For war-risk premiums to come down actuaries have to monitor sustained prices over a 3-4 month period."
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