Oil prices climb as Saudi supply fears counter Russian diesel relief

Oil prices rose in early Asian trading on October 14 as concerns over possible supply disruption in Saudi Arabia outweighed expectations that increased Russian diesel exports could ease tightness in global fuel markets.

Brent crude futures gained 89 US cents, or 0.8%, to US$106.58 a barrel by 12.30pm Thailand time, while US West Texas Intermediate (WTI) crude rose 80 cents, or 0.9%, to US$94.94.

In the previous session, Brent fell 0.9%, while WTI gained 0.4%.

Saudi conflict raises supply concerns

Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said concerns over supplies stemming from fighting between Saudi Arabia and Yemen’s Iran-aligned Houthis were pushing prices higher.

However, expectations of increased Russian diesel exports could reduce market tightness and limit sharp moves in either direction, he said.

Kikukawa expects WTI to trade between US$90 and US$100 a barrel.

The Houthis attacked an administrative building belonging to state-owned oil giant Saudi Aramco in Dhahran, causing a limited fire, according to Saudi Arabia’s Energy Ministry.

The group has launched ballistic missiles and drones at Saudi Arabia over the past week in retaliation for Riyadh’s support for Yemeni government forces.

Riyadh’s international airport has been hit four times, with an attack on October 10 killing 13 people.

Saudi Arabia increased oil production last month despite disruption to shipments resulting from the US-Iran conflict, contributing to a sharp rise in output by the OPEC+ group, which comprises the Organization of the Petroleum Exporting Countries and allies including Russia.

Russian diesel could ease tight market

Traders are also watching prospects for increased Russian diesel supplies.

The Russian government said on October 13 that it saw no direct connection between peace negotiations with Ukraine and an agreement to export diesel to the United States.

Reuters previously reported that US envoys had told Ukrainian officials that the diesel deal formed part of an effort to encourage Russia to return to negotiations towards a peace settlement.

Meanwhile, two senior Iranian officials told Reuters that Tehran was using new tactics to target shipping in the Strait of Hormuz in an effort to keep oil prices elevated and influence the US midterm elections.

The competing supply pressures have left crude markets caught between the risk of further disruption in the Middle East and the prospect of additional fuel flows from Russia.

Source: Reuters