West Texas Intermediate (WTI) crude extended its gains for a fifth consecutive session, trading around $94.30 a barrel during Asian hours on Wednesday. The driver is the escalating fighting between Saudi Arabia and Iran-backed Houthi rebels, which has raised fears of serious disruption to Middle East supply. Even a big jump in OPEC+ output last month has not been enough to calm the market.
The attack on Aramco
Yemen's Houthi militants launched a missile attack on Tuesday that struck Saudi Aramco's headquarters in Dhahran and started a fire in part of the complex. That followed a weekend rebel attack on Riyadh's main airport, as well as a new offensive by a Saudi-led coalition aiming to retake rebel-controlled territory in Yemen. When the headquarters of the world's most important oil company is hit, traders have to price in the risk that production or exports could eventually be affected.
Hormuz: threats and workarounds
Pressure also continues along the Strait of Hormuz, one of the world's most important shipping lanes. Tehran has intensified attacks on tankers moving through the strait. The United States says it helped facilitate safe passage for more than 19 million barrels of crude through the waterway, which shows that shipments are still getting through, but under rising risk. TD Securities summed up the mood: "strength across the energy market is hard to shake as tanker attacks escalate."
More supply, but not enough relief
Supply is growing. OPEC's monthly report, released Tuesday, shows OPEC+ pumped an average of 39.07 million barrels per day in September, up roughly 900,000 bpd from August. Saudi Arabia was the main driver, producing 8.372 million bpd, an increase of more than 2 million bpd. Despite that, prices keep rising, which tells us the market is more worried about disruption than about the amount of oil produced.
There is also a possible new supply source. Markets are hoping a US-Russia diesel agreement could free up extra supply from Moscow. However, the Kremlin said it saw no direct link between the Russian diesel export deal and its stance on Ukraine peace talks, responding to a Reuters report that US envoys had told Ukrainian officials the diesel exports were part of an effort to bring Moscow back to negotiations. Until the details are clear, this remains a hope rather than a barrel.
What this means for Oil
The rally has been built on security events, not on shortages in the data. As long as attacks on Saudi infrastructure and Hormuz tankers continue, risk premiums are likely to stay in the price, and the higher production numbers act as a partial cushion. Higher oil also flows into inflation expectations and bond yields, which is why central banks and the Gold market are watching crude so closely. A sudden de-escalation or a clearer Russian diesel deal could pull prices back quickly.
What traders should prepare for
Further Houthi attacks on Saudi targets and the Saudi-led coalition's offensive in Yemen
Tanker attacks in the Strait of Hormuz and updates on US-escorted shipments
Details of the US-Russia diesel agreement and the Kremlin's position
Today's US CPI report, since oil-driven inflation shapes Fed expectations
OPEC+ production updates, after September's 900,000 bpd rise
Bottom line: Oil is rising on fear of disruption, not on a shortage of supply, and a war that has reached Aramco's headquarters keeps that fear alive.