Oil futures rose as a reported Houthi attack on a Saudi refinery heightened concerns about Middle East supply disruptions, overshadowing diplomatic efforts to ease regional tensions.
December West Texas Intermediate was trading $3.31 higher at $103.21/bbl on Wednesday, and January was up $3.30 at $101.36/bbl. The December ICE Brent contract traded $2.29 higher at $116.17/bbl, with January up $2.98 at $112.39/bbl.
Refined products were also trading higher. November ULSD rose 7.21cts to $4.8473/gal, with the December contract up 8.28cts at $4.70/gal. November RBOB rose 2.86cts to $3.1662/gal, with December up 4.87cts at $3.1125/gal.
The Houthis said Tuesday they had targeted Aramco's 550,000-b/d Ras Tanura refinery in Saudi Arabia's Eastern Province with a ballistic missile. Saudi authorities haven't confirmed the claimed strike or reported damage. A Saudi-led military coalition separately reported intercepting three ballistic missiles launched toward the Eastern Province and four drones targeting the kingdom's southern region. Saudi Civil Defense also reported damage following another intercepted Houthi attack.
Iran, Saudi Arabia, Pakistan and Turkey agreed earlier this week to continue discussions on regional peace and security.
However, ANZ Research analysts said Wednesday that diplomatic efforts had yet to prompt meaningful selling in oil, as traders continued to weigh developments on the ground and the threat to crude supplies.The Wall Street Journal also reported that the U.S. had told several Gulf Arab countries to prepare for a possible short, intense military campaign after the Nov. 3 midterm elections.
Political uncertainty in Israel has added to concerns over the region's security outlook. Citi Research said the political deadlock following Israeli elections increased the risk of renewed military escalation at a sensitive point in U.S.-Israel-Iran relations. Such escalation could add to oil's geopolitical risk premium, while credible progress toward an agreement could unwind some of that premium, the firm added. Citi maintained its expectation for a negotiated agreement by year-end but said the election outcome raises the prospect of a more volatile path.
The U.S. Energy Information Administration reported a fourth consecutive weekly decline in commercial crude inventories, with stocks falling by 1.9 million bbl to 410.6 million bbl last week. Inventories were 4% below the five-year average, while stocks at Cushing, Okla., the Nymex delivery hub, declined by 624,000 bbl to 27 million bbl. The crude draw was larger than the 100,000-bbl decline expected in a Wall Street Journal survey of analysts. Gasoline inventories rose by 3.9 million bbl to 209.2 million bbl, while distillate stocks fell by 1.5 million bbl to 102.8 million bbl.
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