Oil tops $116 to Five-month high as Mideast supply risks mount

Fears of fresh conflict in the Middle East and disrupted fuel supplies have pushed crude oil prices to their highest level in five months.

At the close of trading on Friday (October 23), Brent crude rose above $116 a barrel on the international market. US crude prices also climbed sharply.

According to Reuters, Brent rose $3.55, or 3.14 percent, to $116.72 a barrel on Friday. This is its highest price since April 29. US West Texas Intermediate (WTI) gained $3.80, or 3.8 percent, to $103.27.

For the week, Brent is up 6 percent and WTI is up 2.3 percent. Market analysts say the deteriorating security situation in the Middle East and fears of damage to oil transport and production infrastructure are among the main reasons for the rise.

Adam Turnquist, chief strategist at LPL Financial, said continued attacks by Iran-backed Houthis on locations including Saudi Arabia’s energy infrastructure have heightened concerns over oil supply. This has raised fears of a shortfall and pushed prices up.

Meanwhile, the United Arab Emirates’ Ministry of Climate Change and Environment has reported an oil spill from a tanker off the coast of Umm Al Quwain. The cause of the spill and the identity of the vessel have not yet been confirmed. Several beaches in the coastal area have been closed, and cleanup work has begun in the affected zone.

To deal with the supply situation, several countries have moved to release fuel from strategic reserves. The US Department of Energy has approved an exchange of up to 400,000 barrels of crude from the Strategic Petroleum Reserve to address supply problems at a refinery in Louisiana. Germany has also begun selling diesel, heating oil and crude oil from its strategic reserves.

In Libya, output has fallen after a valve closed on the pipeline carrying oil from the Hamada and Tahara fields to the port of Zawiya. Separately, a diesel-carrying vessel from Russia is heading to New York as part of efforts to keep US diesel prices in check.

Analysts say a prolonged conflict in the Middle East could create new obstacles to oil production, transport and exports, raising the risk of even greater volatility in global fuel prices.

Source: Reuters