Crude oil prices edged higher on Hyperliquid as tensions in the Middle East escalated after Ansar Allah, popularly known as the Houthis, launched a strike on a key Saudi Arabian airport.
Crude Oil Prices Jump as Houthis Attack Riyadh Airport
The West Texas Intermediate (WTI) rose to $96.2, with its open interest hitting $173 million. Brent, the global benchmark, rose to $99.8, slightly higher than where it ended the week at.
Brent and WTI prices are rising as concerns about the Middle East escalated. Houthis launched a major attack near Riyadh Airport. This attack led to a big smoke, with top flight websites showing flight cancellations.
According to Reuters, the attack targeted the airport and a fuel depot belonging to Saudi Aramco. It also happened after Saudi authorities issued their first air raid alert since the war with Ansar Allah started.
The new developments mean that the fighting between the two sides will escalate in the coming weeks, affecting oil flows from Saudi Arabia. This also happened after the closure of the East-West pipeline, which has been pumping millions of barrels of oil since the US-Iran war started earlier this year.
Some analysts warn that fixing the pipeline and the terminal will take months and not weeks as expected because of parts shortages and weather complications. Worse, even when the pipeline is fixed it will become a target by Iran, Ansar Allah, and Iraqi militias.
Meanwhile, there are also concerns that Russia and Ukraine will intensify their campaign against energy assets.
On top of this, Iran continues to strike ships attempting to cross the Strait of Hormuz. As a result, only a handful of ships are managing to cross the narrow strait.
US Strategic Petroleum Reserves are Falling
All this is happening as US oil inventories continue falling, with the Strategic Petroleum Reserve (SPR) falling to the lowest level in over four decades. According to the Energy Information Administration (EIA), there are 284 million barrels of oil in these reserves, down from 415 million barrels in January.
US SPR chart | Source: EIA
Demand is still rising, with China’s crude imports rising by 6.2% in August. These concerns explains why analysts are raising alarm about oil prices. In a statement this week, Michael Wirth, Chevron (NYSE:CVX) CEO, warned that the depleting reserves and falling supplies mean that prices may continue rising.
Goldman Sachs (NYSE:GS) analysts warned that oil may jump to $120 if the supply shock continues. JPMorgan, on the other hand, said that, for the first time, it was not seeing an endgame for oil markets.
The main challenge, analysts say, is that the US-Iran war is in a stalemate, with the two sides not talking. Trump has also hinted that the war will end after the midterm election, which is still 45 days away. And Iran may seek to escalate the war to push oil prices higher.
Image: Shutterstock
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