Oil prices rose Wednesday, rebounding from the previous session's losses as traders weighed renewed threats to shipping through the Strait of Hormuz and attacks targeting Saudi Arabia against a recovery in Middle East oil exports.
December Brent crude futures rose 1.3% to $110.19 a barrel, while December West Texas Intermediate futures gained 1.2% to $98.97 a barrel.
The gains followed a volatile session Tuesday, when Brent climbed above $111 a barrel, its highest level since May, before reversing course as investors assessed prospects for fresh U.S.-Iran diplomacy. Both contracts settled lower.
Shipping risks remained elevated as Iran's Islamic Revolutionary Guard Corps said Tuesday that two oil tankers caught fire after striking mines south of the Strait of Hormuz.
Regional tensions also persisted. The Saudi-led coalition said Wednesday that it intercepted drones launched toward the kingdom, including one targeting the Eastern Province, a major oil-producing region.
Diplomatic efforts to end the conflict are continuing. Qatar's Foreign Ministry said Tuesday that contacts, visits and exchanges of messages between Washington and Tehran remained ongoing, amid efforts to reopen the Strait of Hormuz and end the regional escalation.
Despite the continuing attacks, Middle East oil shipments have surpassed prewar levels. Flows through the Strait of Hormuz and alternative export routes averaged more than 24 million barrels a day in the week through Oct. 18, above the prewar level of 23.3 million barrels a day, according to Kpler.
Alternative export routes have played a growing role in the recovery. Around 40% of Gulf oil shipments now bypass the Strait of Hormuz, up from 17% before the war, as Saudi Arabia and the United Arab Emirates make greater use of pipelines and other shipping routes, The Wall Street Journal reported.
However, refined-product exports have recovered more slowly than crude shipments. The International Energy Agency said Middle East refined-product exports remained below prewar levels, reaching 1.9 million barrels a day in September against 4.7 million before the conflict. The agency expects tight diesel supplies to persist well into 2027.
Recovering oil flows have yet to ease concerns over further supply disruptions. Analysts at ING said elevated shipping costs and persistent Middle East security risks continue to support oil prices, with record tanker freight rates adding to delivery costs.
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