Oil advances on threats to supply from Russia to Middle East

[NEW YORK] Oil rose as Ukraine cast doubt on an “energy ceasefire” touted by US President Donald Trump and Saudi Arabia faced a fresh round of attacks following the deadliest strikes since the start of the Iran war.

Brent crude advanced about 1.8 per cent to settle near US$107 a barrel.

Ukraine will carry on with strikes against Russia, President Volodymyr Zelenskyy said, since Moscow continues to hit its energy infrastructure.

He said he’d learned of the energy truce announced by Trump on social media. “It’s clear” that Russian President Vladimir Putin “doesn’t read Truth Social”, Zelenskyy said. 

“This is not a ceasefire that we would expect to hold, or that’s even in place,” Amrita Sen, founder and director of market intelligence at consultants Energy Aspects, said in a Bloomberg Television interview.

In the Middle East, Saudi Arabia said it had detected and was responding to fresh hostile threats on Monday (Oct 12) while operations at Riyadh’s main airport remain at a standstill. Weekend attacks by Teheran-backed Houthi militants at the transit hub killed at least 14 people and wounded hundreds more. 

There has also been an escalation in strikes against tankers in the critical Strait of Hormuz. Another ship was hit in the waterway on Monday morning New York time, according to state-run Iranian media. A growing number of empty supertankers have stopped or reversed course away from the Persian Gulf, risking increased delays to the flow of crude as vessels are tied up. 

Global benchmark crude prices remain more than 70 per cent higher in 2026 so far with the US war on Iran roiling energy markets. The attacks on Saudi Arabia come just a week after Saudi-led forces in Yemen launched a campaign to retake areas held by Houthi militants. 

Saudi Energy Minister Prince Abdulaziz bin Salman has since sought to project resilience, saying the kingdom remains committed to providing energy security and is even looking to expand its oil pipeline capacity.

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“We now expect Brent crude to average above US$100 a barrel through the second quarter of next year following attacks on Red Sea export infrastructure and a more persistent geopolitical risk premium,” wrote Stephen Hare, lead economist at Oxford Economics, in a note.

“Prices decline thereafter as supply normalises, but the return towards long-run equilibrium is now slower than previously expected.”

While crude shipments across Hormuz have recently been approaching pre-war levels, far fewer refined products have been traversing the waterway, and the squeeze on supplies – particularly of diesel – has caused prices to surge worldwide.

In Russia, months of repeated Ukrainian strikes on refineries have exacerbated the global supply crunch.

Trump said on Friday he would be working with Putin to release Russian diesel into global markets, a move that drew bipartisan criticism in the US and was assailed by European nations and Zelenskyy as giving Russia more resources to continue the war.

Following Trump’s announcement, the US Treasury issued a waiver for previously sanctioned Russian fuel. Moscow said it will ship 500,000 tons to foreign markets, which is a mere fraction of what the nation used to export. 

“The volumes that President Trump announced that Russia’s going to bring to the market make no difference,” Energy Aspects’ Sen said. “These are extremely desperate measures to get the oil price down.”

The US will see some relief in crude production as oil companies return workers to US Gulf of Mexico platforms following Hurricane Isaias. Offshore production has recovered from Friday, when 72 per cent of regional crude output was offline. BLOOMBERG