Oil Prices Climb as Middle East Tensions and Shipping Risks Persist

Oil prices edged higher on Tuesday, supported by ongoing geopolitical tensions in the Middle East, despite strong crude exports from the region and a G7 emergency stockpile release. Brent crude futures rose 27 cents, or 0.3%, to $100.59 a barrel, while US West Texas Intermediate crude futures climbed 30 cents, or 0.3%, to $89.73 a barrel. Shipping data revealed that regional crude exports exceeded pre-war levels on several days in late September, though concerns remain about supply disruptions.

Priyanka Sachdeva, head of market insights at Phillip Nova, noted that while exports have been resilient, the situation is not yet normalized. Renewed attacks on tankers around the Strait of Hormuz have increased, raising costs, insurance, and security risks. Gulf oil flows, excluding Iran, surged to over 81% of pre-war levels in September, led by a recovery in Saudi exports, while Iranian exports dropped to zero due to a US blockade.

The G7 countries agreed to release 100 million barrels of diesel and crude from emergency reserves to ease supply concerns. However, tensions persist, with Saudi-backed forces advancing in Yemen and the Houthis claiming attacks on Saudi airports and an Aramco refinery. These developments keep market participants cautious about sustained lower oil prices, according to Vivek Dhar, an analyst at Commonwealth Bank of Australia.

Middle East crude oil exports have exceeded pre-war levels, but the recent spike in tanker attacks highlights ongoing risks. Gulf to Asia shipping rates have reached new record highs, underscoring the tightness in the shipping market and the vulnerability of the oil supply chain to disruptions.