Middle East Tensions Prop Up Oil Prices Above $100
Oil prices rose in Asian trade on Tuesday, with Brent crude climbing to $100.7 per barrel and West Texas Intermediate (WTI) reaching $89.7. The gains came despite signs of improving regional oil supplies, as renewed geopolitical risks in the Middle East kept traders cautious. The previous session had seen crude prices decline due to stronger-than-expected Middle Eastern exports and the G7’s decision to release oil and diesel from emergency reserves.
Tensions involving Saudi Arabia, Iran, and Yemen’s Houthi forces continue to threaten key shipping routes, adding a risk premium to Middle Eastern supplies. The Houthis claimed attacks on several Saudi targets, including airports and an Aramco refinery, while Saudi-backed forces advanced toward the strategically important Bab el-Mandeb Strait.
Despite these risks, Middle Eastern crude exports exceeded pre-war levels on several days in late September, with Gulf oil flows averaging over 81% of pre-war levels. Saudi Arabia’s crude exports rose sharply, offsetting lower flows from other producers like Iran. However, higher insurance, freight, and security costs persist due to logistical challenges.
The G7’s agreement to release 100 million barrels of diesel and crude oil from emergency reserves over four months has helped restrain price gains. Still, Brent crude remains above the psychologically important $100 mark, supported by supply risks and elevated transportation costs. For India, sustained high crude prices pose concerns over inflation, trade deficits, and input costs.