Oil Prices Rebound as Houthi Attack on Saudi Refinery Revives Supply Concerns

Oil prices rebounded during Asian trading on Wednesday, reversing two days of losses, after Yemen's Houthi group claimed a new attack on Saudi Arabian energy infrastructure, reigniting concerns over potential supply disruptions in the Middle East.

As of 9:20 PM ET, December Brent crude futures rose 1.5% to $115.60 per barrel, while West Texas Intermediate (WTI) crude futures climbed 1.2% to $101.13 per barrel. The gains erased part of a two-day slide that followed a six-month high reached last week.

Geopolitical Tensions Escalate

The immediate catalyst for the price jump was a Houthi claim on Tuesday of a ballistic missile strike against Saudi Arabia's Ras Tanura refinery, one of the largest in the world. The incident underscored the vulnerability of the region's energy facilities amid ongoing conflicts.

This follows other recent attacks claimed by the group, including strikes on pump stations along Saudi Arabia's East-West pipeline—a crucial artery that allows crude shipments to bypass the Strait of Hormuz—and on King Khalid International Airport in Riyadh. These events have heightened investor anxiety over the security of oil production and export routes, particularly as broader tensions involving Iran have already disrupted shipping through the critical Strait of Hormuz chokepoint.

Diplomatic Efforts Overshadowed

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The renewed focus on supply risks has overshadowed recent diplomatic initiatives aimed at de-escalation. Oil prices had previously softened as investors monitored talks held in Tehran on Monday between officials from Iran, Saudi Arabia, Turkey, and Pakistan, where the parties agreed to continue consultations on regional peace and security, according to Iranian state media.

Last week, Brent crude surged above $117 a barrel, its highest level since April, after an attack on an oil tanker near the Strait of Hormuz highlighted the significant geopolitical risk premium factored into current prices.

U.S. Inventories and Fed Watch

Adding further support to prices, the American Petroleum Institute (API) reported on Tuesday that U.S. crude inventories fell by 2.03 million barrels for the week ending October 23. This was a surprise drawdown compared to analyst expectations for an 800,000-barrel increase.

The API data presented a mixed picture, however, with gasoline inventories rising by 2.39 million barrels and distillate stocks increasing by 380,000 barrels. Market participants are now awaiting official inventory data from the U.S. Energy Information Administration (EIA) due later on Wednesday. Investors are also closely watching the Federal Reserve's interest rate decision, seeking clues on the economic outlook and its potential impact on fuel demand.