Middle East Conflict Sends Oil Prices Soaring

Oil prices surged more than 6% to nearly $110 per barrel as markets repriced the escalating conflict in the Middle East. The increase reflects a growing recognition of the threat to regional supply, with Saudi energy infrastructure and crude oil exports from the Red Sea increasingly at risk.

The August production numbers reported by Saudi Arabia showed that it produced 6.24 million barrels per day (b/d), the lowest level since the 1990s. However, the country supplied more to the market than it produced, relying on inventory over the month.

Meanwhile, Iraq increased its supply by 664k b/d in August to 3.38m b/d. Stronger Chinese buying in the physical market is also a concern, with independent refineries in China running at almost 63% after bottoming out in July.