Brent crude oil climbed to $84 as Mideast tensions worsen

Brent crude oil prices hit a fresh 2-month high of $84.80/b on Monday morning, and the U.S.-based WTI oil briefly broke above the $79/b level, driven by the prospect of a regional energy supply disruption in the Middle East and an output delay of refined products in Russia.

A combination of ongoing Houthis attacks on vessels in the Red Sea, and a deadly drone attack on U.S. military forces in Jordan during the weekend, have increased worries over supply disruption in the oil-rich Middle East and Persian Gulf.

Iran-backed Yemen’s Houthi rebels attacked with a missile an oil tanker operating on behalf of Trafigura off the coast of Yemen (in the Gulf of Aden) last Friday, increasing the risk of supply disruptions as more oil tankers linked to Israel, the U.S., and the UK will be under threat of attack by Houthis. (Source: www.cnbc.com)

On Sunday, three U.S. service members were killed and many injured in an unmanned aerial drone attack carried out by radical Iran-backed militant groups operating in Syria and Iraq, on forces stationed in a northeast Jordan outpost near the Syria border, according to the White House. (Source: www.whitehouse.gov) 

They were the first American fatalities from enemy attacks since Israel’s war with Hamas began on Oct. 7, with Biden’s administration vowing retaliation for all those responsible for the deadly attack.

At the same time, Russian refined product exports are set to fall, with refineries and a major oil terminal under repair following drone attacks by Ukraine.

Russia will likely cut exports of naphtha, a petrochemical feedstock, by some 127,500 - 136,000 barrels per day, or around a third of its total exports, after fires disrupted operations at refineries on the Baltic and Black Seas, according to traders and LSEG ship-tracking data. (Source: sg.finance.yahoo.com)

Brent crude oil, 4-hour chart

In this context, energy traders have turned bullish on crude oil contracts, with both Brent and WTI prices having managed to bounce off mid-December lows of $72/b and $67/b respectively driven by demand worries over global economic slowdown, to the current levels of $84/b and $79/b, adding $12/b or nearly 17% gains.