Drone attacks on Saudi Arabia and Russia push WTI above $97.50

Immediate fears of energy supply disruptions intensified after drones struck Saudi and Russian oil facilities.
By attacking Russian oil infrastructure with drones, Ukraine has signalled Kyiv’s determination to disrupt Moscow’s diesel exports under the agreement between Trump and Putin.
An increase in Middle Eastern exports, alongside forthcoming Russian diesel deliveries, could limit the upside in oil prices.

Supply concerns have lifted West Texas Intermediate (WTI) oil, ending a three-day decline, with prices hovering around $97.70 in Thursday’s Asian session. The rise in crude followed a drone strike on Saudi Aramco’s Shaybah oil field, which resulted in two casualties. Alongside heightened geopolitical tensions in the Middle East, the attack has deepened fears of possible disruptions to energy supplies. Citing increased safety risks, the United States (US) has directed select personnel and family members to leave American embassies in Saudi Arabia.

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Beyond the Middle East, geopolitical hostilities are also shaping global energy markets. Large-scale drone strikes launched by Ukraine this week targeted Russia’s critical oil infrastructure. The attacks indicate Kyiv’s active determination to undermine Moscow’s capacity to increase diesel exports under the recent agreement between Presidents Trump and Putin.

A rise in supplies from major producers could nevertheless restrain further oil price gains despite these disruption fears. Export flows from the Middle East are approaching prewar levels: Saudi Arabia’s crude exports rose 7.9% in August to their highest level since March. Further additions to global supply are expected, with Russia set to deliver its first diesel shipment to the United States on Thursday.

As broader markets continue to adjust, Brown Brothers Harriman strategists describe Brent crude oil prices as "holding on to recent gains near $110 a barrel,". Their assessment that "bond yields are edging higher while stocks are extending their recovery," puts Europe in particular focus, where the "French 10-year bond yield premium over Germany is closing in on a 24-year high." Turning to currencies, BBH notes that the "USD is mixed just above yesterday’s lows, with interest rate differentials supportive of the currency." Rabobank, meanwhile, argues that the "full-fat Pax Americana being over portends more Middle East instability ahead," supporting the view that shifting geopolitical conditions could keep risk premiums elevated across oil-linked assets.

WTI Oil: Key Questions Answered

What Defines WTI Oil?

Traded in international markets, WTI oil is a variety of crude oil. Short for West Texas Intermediate, WTI is one of three major varieties, alongside Brent and Dubai Crude. Its relatively low gravity and sulphur content earn it the descriptions “light” and “sweet”, respectively. Regarded as a high-quality oil, it is readily refined. Production takes place in the United States, with distribution through the Cushing hub, known as “The Pipeline Crossroads of the World”. WTI serves as an oil market benchmark, and its price is regularly cited in media reports.

Which Factors Shape WTI Oil Prices?

Supply and demand determine WTI oil prices, just as they do for other assets. Stronger global growth can therefore lift demand, while weaker growth can have the reverse effect. Supply disruptions caused by political instability, wars or sanctions can affect prices. Another major influence is the production policy of OPEC, a grouping of leading oil-producing countries. Since oil is traded mainly in US Dollars, movements in the value of the US Dollar also affect WTI crude oil prices: a weaker dollar can make oil more affordable, while a stronger dollar can do the opposite.

Why Do Inventory Figures Affect WTI Oil Prices?

WTI oil prices respond to the weekly oil inventory releases from the American Petroleum Institute (API) and the Energy Information Agency (EIA). Inventory movements indicate shifts in supply and demand. A fall in stocks may signal stronger demand and lift oil prices; rising inventories may point to greater supply and weigh on prices. Every Tuesday brings the API report, followed by the EIA release the next day. The two reports generally produce similar readings, with results within 1% of one another 75% of the time. As the EIA is a government agency, its figures are regarded as more reliable.

How Do OPEC Decisions Affect WTI Oil Prices?

At meetings held twice a year, the 12 oil-producing nations in OPEC (Organization of the Petroleum Exporting Countries) jointly set output quotas for member countries. These decisions frequently influence WTI oil prices. A reduction in quotas can constrain supplies and lift oil prices, whereas an increase in OPEC production has the reverse effect. The wider OPEC+ grouping brings in ten additional non-OPEC members, with Russia the most notable among them.