Oil Prices Drop While Remaining Near Six-Month Highs

Oil prices fell today after surging sharply last week, but remained close to their highest levels in nearly six months, as fears of renewed combat between the United States and Iran receded, although ongoing attacks on Saudi Arabia kept investors wary of supply disruptions.

Prices had risen by about $3 at Friday’s close after Houthi attacks in Saudi Arabia sparked concerns about energy supplies.

“With the risks from Houthi attacks on Saudi Arabia doubling, any drop in Brent crude to last week’s lower levels will attract eager buyers,” said John Evans, an analyst at PVM Oil Associates.

Despite mediation talks, attacks continued at the start of the week, with the Houthis announcing strikes on pumping stations along the East-West crude oil pipeline and on Riyadh Airport.

Data compiled by the Washington Institute for Near East Policy indicates that October has become the worst month for attacks on commercial shipping in the Strait of Hormuz and nearby waterways.

Saudi Oil Minister and his Singaporean counterpart announced today that Saudi Aramco will begin storing crude oil in Singapore from the second half of 2027, to bolster the resilience of its supply chain in the region.

Fatih Birol, Executive Director of the International Energy Agency (IEA), said today that he does not expect energy markets to return to their pre-war levels with Iran in 2027, following the conflict that erupted in late February.

The conflict has led to a significant supply shortage in a market that was expected to see a surplus this year, causing major disruptions to global energy flows and driving oil and refined product prices to record highs.

Speaking at the Singapore International Energy Week conference, Birol said, “I fear I do not see any reliable path for markets to return to the situation we had before this war broke out next year.”

He added, “Therefore, we all must prepare, making energy security the top priority for our governments and the business community, without forgetting what the next chapter holds for the countries and companies present here today.”

Continued Houthi attacks on Saudi Arabia pushed Brent crude futures to $117 a barrel on Friday, their highest level in nearly six months.

Birol told a press conference, “Oil prices are approaching $120 a barrel, and product prices are much higher than that.”

He declined to provide oil price forecasts but added, “I can tell you that the current oil price, for some countries like Europe, may not be excessively high and is manageable. But in many parts of the world, oil prices nearing $120 have a significant impact on trade deficits.”

Birol also expressed concern about winter demand for certain fuel types, particularly diesel, used for heating in parts of the West.

He said, “What exacerbates my concern is refined products, as we are on the cusp of... the winter season. In some parts of the world, where diesel demand typically rises, several refineries are undergoing maintenance.”

He added, “Europe is facing a harsh winter because European countries have decided to reduce gas imports from Russia, and with the new problem emerging now from the war on Iran—the inability of Qatar and the UAE to export gas as they did before—this will place considerable pressure on gas markets.”

He added that the latest survey conducted by the International Energy Agency showed that nuclear power plants with a capacity of 90 gigawatts are under construction, marking the highest figure in the past 40 years.