Oil benchmarks secure fourth consecutive monthly advance

Oil prices finished October with a fourth consecutive monthly gain as an attack on a tanker in the Strait of Hormuz and renewed threats to Saudi energy infrastructure heightened fears of further disruption to Middle East supplies.

Brent crude futures for December settled on Friday at $117.64 a barrel, up 2.4 per cent, while US West Texas Intermediate crude closed at $104.12, gaining 2.08 per cent. Brent advanced 13.6 per cent over October and WTI rose 15.2 per cent, extending a rally driven by the war involving the United States, Israel and Iran.

The benchmarks reached their highest levels since late April, reflecting mounting concern that hostilities could intensify after the United States holds its midterm congressional elections on 3 November. Traders are assessing the possibility of additional military operations alongside the continuing risk to tanker movements through the Gulf.

Friday’s immediate catalyst was an attack on a tanker navigating the Strait of Hormuz, a critical passage for oil and petroleum products exported from Gulf producers. The United Kingdom Maritime Trade Operations organisation said explosive devices had been attached to the vessel by a small boat. The identity of those responsible was not immediately established.

Maritime sources described the incident as the first known successful attack involving limpet mines in the strait since the war began in February. The method raised fresh concerns about the vulnerability of commercial vessels while shipping continues. The strait remains an essential export route for producers serving international buyers, making security incidents important for freight and insurance costs.

The attack followed claims by Yemen’s Houthi movement that it had targeted several Saudi energy installations, including the Ras Tanura and Rabigh refineries and a production facility at Abqaiq operated by Saudi Aramco. Those claims did not independently establish damage to the facilities or disruption to their operations.

A Saudi-led coalition separately said it had intercepted a cruise missile directed towards the kingdom’s western region. The developments increased attention on the security of both shipping corridors and land-based energy infrastructure, with the potential for interruptions affecting crude and refined fuel supplies.

Diplomatic contacts nevertheless continued. Qatari mediators returned to Tehran on Friday as part of efforts to facilitate an agreement between Washington and Iran. The renewed engagement came against a backdrop of uncertainty over whether negotiations could produce terms acceptable to both sides.

US President Donald Trump said on Thursday that Vice President JD Vance had contacted Iran to help the country obtain medical supplies. Iran acknowledged receiving a letter from Vance but had not issued a response, while maintaining that any agreement would need to meet its stated conditions.

Ole Hansen, head of commodity strategy at Saxo Bank, said oil traders were becoming increasingly anxious ahead of the American elections. Market participants have been weighing whether the political calendar could influence the timing of further military action against Iran.

Giovanni Staunovo, a commodity analyst at UBS, said the likelihood of escalation and supply disruption remained elevated despite diplomatic activity. The uncertainty has added a substantial geopolitical premium to crude prices, complicating assessments of the underlying balance between consumption and available production. Saxo Bank indicated that prices could remain above pre-war levels even after fighting ends because trade links and inventories would need rebuilding.

Banks have also revised their expectations for energy costs. ANZ raised its year-end Brent projection by $10 to approximately $105 a barrel, assuming constraints on Middle East exports, shipping capacity and fuel availability persist through December.

A survey of 32 economists and analysts placed the average Brent forecast for 2026 at $92.88 a barrel, compared with $89.05 in the previous survey. The corresponding WTI projection increased to $86.60 from $83.90, reflecting persistent supply constraints and elevated transportation costs.

Physical markets remain tight despite some recovery in shipments through Hormuz. Limited inventories and expensive freight have compounded supply concerns, while higher fuel costs have weighed on consumption expectations. Analysts anticipate a substantial decline in oil demand during 2026 before growth resumes next year. A possible surplus in 2027 depends on improved Gulf shipments.

Saudi crude oil exports increased during October, providing some additional available supply to international buyers. Elsewhere, Libya lost approximately 15,000 barrels a day of pipeline flows after an armed group closed a valve, adding another smaller interruption to a market already sensitive to production and transport setbacks.