Oil prices faced a significant increase on Wednesday as the market assessed supply constraints caused by the storm moving toward oil-producing regions in the U.S. and the Houthi attacks on Saudi Arabia.
Oil Price Changes
As of 04:00 GMT, Brent crude futures rose by $1.05, or 1.04%, to $101.63 per barrel. Meanwhile, U.S. West Texas Intermediate crude futures were also traded up by 80 cents, or 0.89%, at $90.24 per barrel.
Storm Threat and Its Impact on the Market
U.S. meteorologists announced that a storm forming in the Gulf of Mexico is expected to become the first Atlantic storm of 2026 within two days. This storm is likely to impact oil and gas production facilities. Offshore areas of the Gulf of Mexico produce 15% of U.S. crude oil and 5% of the country's natural gas. Tim Waterer, a senior analyst at KCM Trade, stated: "This storm poses an unintended complication for the crude oil market and increases the likelihood of disruptions in production and refining."
The storm could affect the operations of six refineries. Refineries located in the coastal states of the Gulf of Mexico account for about 50% of the country's 18.2 million barrel per day refining capacity. Market sources reported that U.S. crude oil inventories fell by 2.09 million barrels last week.
Supply Risks in the Middle East
Commodity strategists at ING Bank noted that the market is likely to be concerned about any potential supply disruptions. They added that supply risks in the Middle East, amid ongoing attacks on vessels, remain very real.
Supply is improving. Prince Abdulaziz bin Salman, Saudi Arabia's Minister of Energy, announced that oil transfers through the country's East to West pipeline have reached 5.8 million barrels per day. However, the Saudi aviation authority reported that airports in Jazan and Najran were targeted in attacks. These attacks occurred as Yemeni government forces, supported by Saudi Arabia, launched a large-scale operation to reclaim areas under Houthi control.
Mukesh Saha, a senior oil analyst at X-Analysts, stated: "The attacks and shutdowns of refineries are likely to keep the price gap elevated and the shortage will be transferred to the crude oil market." He predicted that crude oil prices will remain near $100 unless a significant de-escalation occurs.
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