Saudi Crude Exports Plunge 33%, Fueling Oil Price Surge

Concerns are growing that high oil prices and interest rates could become a prolonged 'new normal' as several economic indicators point to sustained inflationary pressures. Saudi Arabia's August crude exports fell by 33% and output dropped 23%, driving Brent and WTI up more than 6%. The US August PPI rose, the ECB raised its policy rate, and the US 10-year Treasury yield reached 4.969%.

The protracted Middle East war and the Houthi threat to the Bab el-Mandeb Strait are fueling expectations of a further drop in Saudi crude exports in September, raising the risk of weaker investor sentiment in stock markets. Forecasters believe that persistently high energy prices will fuel inflation and keep central banks on a tightening path.

Oil prices surged as Brent crude for November settlement closed up $6.42, or 6.34%, at $107.63 a barrel on London's ICE Futures Europe exchange, while West Texas Intermediate futures for October delivery settled up $6.43, or 6.69%, at $102.48 a barrel on the New York Mercantile Exchange.

Jim Burkhard, vice president at S&P Global Energy, said that 'the oil market is settling into a new normal of higher prices'. Expectations have strengthened that the Federal Reserve will raise interest rates on September 16, with the probability of a quarter-point increase rising to 69.6%.