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Source: Newsmaker.id
Oil prices strengthened again in trading on Friday (October 23) following attacks by the Houthi group on Saudi Arabia, which fueled concerns regarding potential disruptions to energy supplies from the Middle East. UKOIL (Brent) stood at US$113.97 per barrel, while WTI reached US$102.01 per barrel. Brent is on track for its third consecutive weekly gain, whereas WTI has seen more limited movement.
Tensions escalated after Saudi Aramco reportedly ordered the evacuation of its headquarters in Dhahran, near Bahrain. The intensifying conflict between Saudi Arabia and the Yemen-based Houthi group has reignited fears regarding the security of oil distribution routes in the Persian Gulf region and beyond.
Analysts at ING note that the market is increasingly concerned about the possibility of further escalation in the Persian Gulf. Although oil flows have remained relatively stable thus far, the potential for disruption has kept a geopolitical risk premium embedded in oil prices. Should tensions rise further, upward pressure on prices could intensify.
The conflict also concerns the Bab el-Mandeb Strait, a vital shipping lane at the mouth of the Red Sea. The market is now monitoring the extent of actual disruptions to energy shipments and the time required to restore operations. The longer these attacks persist and shipments remain delayed, the stronger the case for oil prices to remain at elevated levels.
Supply pressure has also emerged from Libya, following the closure of a valve on a pipeline connecting the Hamada and Tahara oil fields to the port of Zawiya. This closure has led to a decline in production at both fields, further heightening market concerns regarding potential supply disruptions from various oil-producing regions.
Newsmaker Analysis: Oil market fundamentals remain broadly bullish as the geopolitical risk premium rises once again. The market’s focus is now not only on price levels but also on whether the attacks in the Middle East will begin to tangibly disrupt export flows. If supply disruptions spread, oil prices could potentially remain at high levels, whereas an easing of the conflict might reduce the risk premium and open the door for a correction. (srh)
Source: Newsmaker.id