Brent Crude Oil Rises To US$117 Per Barrel On Intensifying Houthi Attacks, Shipping Disruptions

KUALA LUMPUR, Oct 26 (Bernama) -- Brent crude oil prices have risen to US$117 (US$1=RM4.08) per barrel, driven by intensifying Houthi attacks on Saudi infrastructure and slower flows through the Strait of Hormuz, according to Rystad Energy.

In a note today, the energy research firm said freight rates had also surged, with Saudi crude shipments to Asia increasingly being forced onto longer and more expensive routes.

It said these developments were raising delivered oil costs and were increasingly being priced into Brent futures contracts.

Rystad Energy chief economist Claudio Galimberti said the pressure on oil markets is coming from both supply disruptions and rising transport costs.

“Attacks on Saudi infrastructure and reduced flows through the Strait of Hormuz are tightening supply, while freight costs from Yanbu to Ningbo have doubled since early September, making oil more expensive to deliver to Asia.

“There is little immediate relief in sight for the United States diesel prices, leaving energy costs a political headache ahead of the US midterm elections,” he said.

According to Galimberti, central banks face a similar dilemma: higher interest rates cannot restore disrupted oil supplies, even as rising energy costs add to inflation.

“This week’s economic data and central bank decisions will offer clues on how resilient the global economy remains if energy disruptions persist, while big tech earnings will put the spotlight on whether artificial investment (AI) investment is generating sufficient returns,” he added.

Meanwhile, Rystad Energy said the macroeconomic outlook increasingly presented a combination of resilient growth and persistent inflation, with US employment and business activity remaining robust, while China's economy showed modest signs of stabilisation.

“Yet higher energy costs are complicating monetary policy,” it argued.

It sad the US Federal Reserve, European Central Bank and Bank of Japan were expected to hold rates this week, with further tightening anticipated in December.

“Whether additional rate hikes can effectively address predominantly supply-driven inflation remains questionable,” it said.

Rystad Energy also said the intensifying Houthi attacks pushed freight rates up as Saudi cargoes were forced on longer, more expensive routes.

It said the intensification of the Houthi campaign against Saudi Arabia was contributing to higher freight rates, alongside already tight tanker supply from the Persian Gulf.

“The continued kinetic pressure on tankers in the Red Sea has pushed Saudi cargoes to use longer routes, primarily via the Suez Canal and around the Cape of Good Hope.

“This pushed freight on the Yanbu-Ningbo route via the Suez and Cape of Good Hope to jump from $24 per barrel in early September to $48 as of Oct 22,” it said.

It added that the spike widened the gap between Saudi export prices and delivered costs in Asia, squeezing Aramco’s netbacks.

-- BERNAMA