Middle Eastern risk premium supports oil prices, Brent crude hits five-month high

1. On Tuesday, oil prices rose, with Brent crude climbing as much as 1.6% to a new five-month high of $110.94 per barrel, and US crude rising as much as 1.3% to a one-month high of $99.75 per barrel. Traders are pricing in geopolitical risk premiums brought by events such as Houthi attacks on Saudi infrastructure and assaults on Gulf vessels. 2. Analysts at ING stated in a report that oil prices remain well supported, indicating the market has absorbed a considerable amount of risk premium; if capital flows remain smooth and are not affected by geopolitical tensions, the risk premium may decline slowly, but there are currently no signs of this. Vessel tracking agency Kpler reported that at least 18 ships have been attacked in the past two weeks, helping to sustain the risk premium. 3. On Monday, Yemen's Houthi forces claimed responsibility for multiple attacks on Saudi energy, airport, and military targets, including Saudi Aramco facilities in Yanbu, the Shaybah oil field, King Khalid International Airport in Riyadh, and Abha Airport. On the same day, the Houthis attacked a government security forces training camp in Shabwah province, Yemen, resulting in 58 deaths and more than 200 injuries. The resurgence of attacks has heightened concerns over regional stability, underscoring the ongoing risks to energy supplies and keeping oil prices above $100 per barrel. 4. Preliminary investigations show that last week, US crude oil and refined product inventories are both expected to have declined. Previously, on Friday, Trump signed an executive order exempting the US from key sanctions and tariffs against Russia, including tariffs and fines on Russian energy purchases; however, last Saturday, Trump said a final decision had not yet been made, and Secretary of State Rubio stated that officials hope to have more time for assessment. The International Energy Agency reported that Russia’s daily crude oil output in September increased by 65,000 barrels to 8.43 million barrels, but was still about 870,000 barrels lower than a year ago. 5. Analysts indicated that the prospect of increased Russian diesel supply theoretically provides some relief, but traders appear more concerned about the continuing risks to Gulf energy infrastructure.