Oil Climbs as Houthi Attacks on Saudi Arabia Offset Supply Recovery

Oil prices rose on Wednesday as attacks by Yemen's Iran-backed Houthis on Saudi Arabia renewed worries over crude flows from the Middle East, even as supplies continued to recover.

Futures for international benchmark Brent crude for December delivery gained 0.93% to $101.52 a barrel. US West Texas Intermediate futures for November advanced 0.81% to $90.16 per barrel.

Supply is recovering, but risk stays high

Saudi Energy Minister Prince Abdulaziz bin Salman said oil pumped through the East-West Pipeline had reached 5.8 million barrels as of Tuesday morning, a signal that physical supply is rebuilding.

That recovery was not enough to settle the market. The Saudi aviation authority reportedly said Tuesday that the country's airports in Jazan and Najran were targeted in two attacks, as hostilities between Yemen's Iran-backed Houthis and the kingdom grow.

Strait of Hormuz adds to trader anxiety

Iran's move to step up attacks on tankers transiting through the Strait of Hormuz has also led to renewed worries over oil supplies among traders. The waterway is crucial to global exports, and any disruption there threatens the fragile rebound in oil shipments through it.

Analysts see a market pulled two ways

Naeem Aslam, chief investment officer of Zaye Capital Markets, said Tuesday that oil remains "caught between improving physical supply and persistent geopolitical risk."

Samer Hasn, senior market analyst at forex trading platform XS.com, said the sustained ability of the Houthis in Yemen to target oil facilities hundreds of kilometres from the border keeps the risk of a renewed large-scale crude supply disruption "present and high." He added that those risks could worsen if the Houthis feel the need to apply more pressure as a result of losing more territory.

What it means for Nigeria

Nigeria's budget and foreign exchange earnings lean heavily on crude receipts, so firmer Brent prices support government revenue and oil-backed inflows into the naira. The same Middle East risk premium lifting prices, however, raises freight and insurance costs for importers, a burden Nigerian businesses already carry.