WTI crude tops USD 90 on Saudi-Houthi tensions

Oil prices have seen a modest rise overnight, with WTI crude reclaiming the USD 90 per barrel mark. This uptick comes amid ongoing tensions between Saudi Arabia and the Yemeni Houthis, which have contributed to supply-related concerns. However, gains were limited following the previous day's volatile trading, which was influenced by comments from the Saudi Energy Minister. He noted that 5.8 million barrels per day are currently flowing through the East-West pipeline, with operations resuming about five days after a recent attack.

Gold prices edged lower as the dollar strengthened and yields rebounded, mirroring the movement in oil prices. This shift aligns with typical market behavior when supply-driven factors are at play rather than growth-related optimism. Meanwhile, copper prices dipped slightly, reflecting subdued risk appetite in Asia and the absence of Chinese buyers in the market.

The context of supply shocks in the Gulf highlights two distinct scenarios: attacks that disrupt flow and those that merely pose a threat. The recent confirmation by the Saudi Energy Minister that the East-West pipeline is operational again places the current situation closer to the latter category. This explains why WTI's return to the USD 90 level has been met with capped gains rather than a significant surge. The market's focus remains on the prompt end of the curve and freight costs, which will determine the sustainability of this price movement.

Historically, recurring low-grade attacks have embedded a risk premium that decays as infrastructure proves resilient. However, each new strike resets this premium. The easing of gold prices alongside a firmer dollar and rebounding yields fits the established pattern when supply concerns dominate. Copper's drift lower, in line with thin trading volumes in Asia, underscores the cautious sentiment prevalent in the region.