Crude oil prices surged to a six-month high this week as escalating tensions in the Middle East raised concerns over supply disruptions. The U.S. West Texas Intermediate (WTI) futures for December delivery climbed 4.46% to $103.44 a barrel, following a 7.81% gain the previous week. Brent crude futures for December also rose 6.24%, reaching $116.93 a barrel after a 4.91% increase the week before.
Goldman Sachs' co-head of Global Commodities Research, Daan Struyven, attributed the price surge to growing downside risks to supply. He noted that refiners and other physical buyers are stocking up on crude due to intensified shipping attacks and strikes on infrastructure by the Iran-aligned Houthis. With inventories low, buyers are securing barrels while they are still available. Struyven described the situation as having a 'high probability of a sharp drop in supply,' driving precautionary buying in the physical oil market.
The bank also highlighted financial-market demand, with investors buying oil as a hedge against higher energy prices. Goldman Sachs sees risks to oil prices as increasingly symmetrical, though Struyven emphasized that risks to their forecasts remain skewed to the upside. The firm's base case predicts Brent crude ending the year at $90 a barrel and averaging $80 a barrel in 2027.
Tensions around key Middle East shipping routes have intensified, with recent attacks by the Houthis adding to supply concerns. Saudi Aramco evacuated its headquarters in Dhahran amid escalating fighting, while an oil spill was detected off the coast of Umm Al Quwain in the United Arab Emirates. These developments have further heightened worries about the movement of oil and other energy products.