Brent Above $111: Saudi Attacks Lift Oil Prices
Brent climbs to as much as $111.50 as attacks on Saudi targets sharpen supply fears and weigh on equities and the Fed's room to maneuver.
Brent Rises to $111 as Saudi Attacks Sharpen Supply Fears
Key Takeaways
- Brent climbs as much as 2.5% to $111.50 a barrel on Thursday.
- Houthi attacks in Saudi Arabia and a partial US diplomatic withdrawal fuel fears of supply disruptions.
- Expensive oil weighs on equities and complicates the Fed's path.
Anyone checking commodity markets on Thursday morning sees one number above all: Brent trades at just over $111 a barrel, while WTI approaches $99. Both grades are up about 2%. The rally has a clear trigger.
An Oil Field, an Airport and an Evacuation Order
According to OilPrice.com author Irina Slav, the Houthis attacked a Saudi oil field and an international airport. Washington responded by ordering non-essential diplomats out of the kingdom. For traders, that signals a security situation less stable than prices implied on Wednesday, when Brent traded just above $109.
The other side offers little reason for calm. Iran's Foreign Minister Abbas Araqchi wrote in the Financial Times that his country is prepared to defend itself, and he distrusts American peace overtures. President Masoud Pezeshkian says talks are impossible under a blockade. Stefan Jäger of Finanzmarktwelt describes deadly attacks in Saudi Arabia but gives neither a casualty count nor a perpetrator.
Only output offers some relief: according to ING analysts, Kuwait is again pumping more than 2 million barrels a day. Fuel production, however, remains well below pre-war levels.
From Barrel to Fed: How the Oil Shock Reaches Markets
The momentum is not new. Claudio Kummerfeld of Finanzmarktwelt calculated earlier this week that Brent has gained roughly $13 since the start of October and is up about 80% since the start of the year. Capital Economics sees the risks clearly skewed to the upside.
That creates a dilemma for monetary policy: the longer energy stays expensive, the harder it is for the Fed to gain room to maneuver. The pressure hits equity markets at an awkward time. Nasdaq 100 futures are down 1.6% pre-market, and Germany's DAX (the country's main blue-chip index) is off about 0.8%. Tesla (down 4.7%), IBM (down 5.4%) and Lam Research (down 8.6%) disappoint despite partly solid results. Safe havens only partly benefit: US Treasuries are in demand, while gold slips.
What momentum says
Momentum signals a bullish state for Brent crude across all four timeframes: 1 hour, 4 hours, 1 day and 1 week all point upward together. At the time of capture, the price stood at $112.01. This describes the trend and is not a recommendation to act.