Oil Prices Surge Amid Regional Tensions and Oil Spill

The price of a barrel of Kuwaiti crude rose by $1.76 to reach $114.09 in trading on Friday, compared to $112.33 on Thursday, according to the price announced by the Kuwait Petroleum Corporation.

In global markets, oil prices rose at settlement by more than $3 yesterday, hitting their highest settlement level in nearly six months. This followed concerns raised by Houthi attacks on Saudi Arabia about further disruptions to energy supplies from the Middle East, while UAE authorities also announced an oil spill.

Brent crude futures rose $3.55, or 3.14 percent, to settle at $116.72 per barrel, their highest level since April 29. US West Texas Intermediate (WTI) crude futures increased by $3.80, or 3.8 percent, to $103.27. Brent crude finished the week up 6 percent, while US crude ended the week with a 2.3 percent gain.

Adam Turnquist, an analyst at LPL Financial, said, “Fears of supply disruptions drove prices higher after Iran-aligned Houthi rebels launched a series of attacks across Saudi Arabia, including strikes on energy infrastructure.”

Reuters reported that Saudi Aramco ordered the evacuation of its headquarters in Dammam on the Gulf coast near Bahrain on Thursday, as fighting intensified between the world’s largest crude oil exporter and the Houthis in Yemen.

The UAE Ministry of Climate Change and Environment stated that an oil spill had been detected from a tanker off the coast of Umm Al Quwain. The ministry did not specify the cause of the spill, and authorities did not identify the name of the tanker involved.

On October 9, shipping sector sources said the tanker “J Number 2” was hit by an unidentified projectile 13 nautical miles (24 kilometers) west of the Al Jazirah area in the UAE.

Andrew Lippoo, head of Lippo Oil Associates, said, “The market is concerned about these ongoing Iranian attacks on tankers, which we have seen increase over the past week. Although there has been an increase in the volume of oil transiting the Strait of Hormuz, this could change at any moment.”

Data compiled by a Washington-based research center that has tracked maritime security incidents worldwide since 2017 showed that October was the worst month for attacks on commercial ships in the Strait of Hormuz and adjacent waterways.

US President Donald Trump said on Friday that the United States could end the war with Iran quickly, but questioned whether Washington should allow the conflict to gradually fade.

The US Department of Energy authorized an emergency swap of up to 400,000 barrels from the country’s Strategic Petroleum Reserve to address a supply disruption affecting Phillips 66’s Lake Charles refinery in Louisiana.

The Strategic Petroleum Reserve had already reached its lowest level since 1982, after Trump tapped into it amid disruptions to supply lines caused by the US war with Iran.

Meanwhile, the German Oil Agency (Bundesanzeiger) issued a tender to sell quantities of diesel, heating oil, and crude oil from its strategic reserves.

This marks the first withdrawal of oil by Germany from its strategic reserves since G7 countries, under pressure from Trump, approved such measures in early October.

In Libya, the head of the National Oil Corporation told Reuters on Thursday that a valve on the oil pipeline extending from the Al Hamada and Al Tahara fields to the port of Al Zawiyah had been closed, leading to a drop in production at both fields.

Data tracking vessel movements on Friday showed that the first shipment of Russian diesel to the United States is now aboard a tanker bound for New York, following a surprise agreement announced by U.S. President Donald Trump with Moscow. Trump announced the deal this month as part of efforts to lower diesel prices ahead of the midterm congressional elections on November 3.

Among the steps taken by the U.S. president in this regard were exempting Russia from certain new sanctions and threatening Europe with a ban on U.S. diesel exports unless it drew from its emergency reserves to help lower prices.

Shipping data from the London Futures Exchange Group indicated that the medium-sized Maltese-flagged tanker Agioi Vavandis was loaded with 40,000 tons of ultra-low-sulfur diesel at the Russian port of Primorsk on the Baltic Sea on October 22, and is expected to arrive in the United States on November 7.

The identity of the buyer or seller remains unknown. This is the first shipment imported by the United States since former President Joe Biden imposed a ban on U.S. imports of Russian oil and petroleum products in 2022. On October 9, Trump announced that Russia would immediately export 300,000 tons, or approximately 2.25 million barrels, followed by 500,000 tons in November, and “one million tons immediately thereafter.”

Dmitry Peskov, spokesperson for the Kremlin, confirmed that the first tanker under the agreement had departed, but did not clarify whether it was heading to the U.S. market or another destination. Speaking at a daily press conference via telephone, he said, “As far as I know, reports from the Department of Energy indicate that the first tanker has already set sail for its recipients, i.e., buyers. Subsequent shipments will continue at a regular pace from now on.”

The agreement with the United States included Russia lifting its domestic ban on diesel exports.

Since the European Union imposed a ban on importing any Russian petroleum products in February 2023 due to the war in Ukraine, Russia has exported diesel to several countries, notably Brazil and Turkey, as well as African nations. Russia also supplies diesel to Central Asian countries via rail.

Shipping data from the London Futures Exchange Group and Kpler last week showed a resumption of tanker voyages carrying diesel to usual destinations after Moscow lifted a risk restriction on diesel exports. At least two tankers indicated their destinations were Turkey and Brazil.

The destinations of other tankers remain unclear. Data from the London Futures Exchange Group showed that shipments loaded at the Russian port of Primorsk were destined for Gibraltar, the Atlantic coast, or Port Said.

Russian Deputy Prime Minister Alexander Novak stated that the United States would receive additional diesel shipments, while companies from both countries are finalizing the required contracts in this regard.

Kirill Dmitriev, Putin’s envoy who also heads the Russian Direct Investment Fund, said last week that the U.S. Treasury had requested the fund’s assistance in resolving complex payment issues related to the agreement. A source familiar with the matter said this account was inaccurate. Novak noted last week that Moscow would be able to increase diesel exports to between 3 and 3.5 million tons per month by the end of the year.