Wednesday broke a two-session losing streak for oil. Brent crude was at $116.19 a barrel by early afternoon in New York, up 2.0% on the day, after touching $116.50. WTI, the US benchmark, gained 3.1% to $103.05.
Two things pushed prices back up. One was the Houthis saying a missile of theirs had struck Ras Tanura, home to Saudi Arabia's biggest refinery and one of its main oil ports. The other was a Wall Street Journal report that US strikes on Iran could resume soon after the Nov. 3 midterms, and that Gulf governments have been told as much.
Two very different accounts
The Houthi version and the Saudi version of Tuesday do not line up.
Yahya Saree, the Houthi military spokesman, called it an accurate strike, one that he said left big fires burning at Ras Tanura. Saree also counted the Defense Ministry's Riyadh headquarters among the targets it had hit.
Saudi Arabia's story centers on its air defenses. By the official Saudi count, five ballistic missiles were knocked out on Tuesday: two heading for Riyadh, announced by coalition spokesman Turki al-Malki, and three bound for the Eastern Province, where Ras Tanura sits. Saudi Civil Defense reported missile fragments landing in Riyadh, where they damaged a building, a construction site and a car.
A fire did break out near Ras Tanura early on Tuesday. "The fire has reportedly been contained," said Vanguard, a firm that tracks risks to shipping, adding that "the extent of damage and any impact on oil-loading operations remain unclear." Bloomberg's unnamed source put the blaze near the export terminal. As of Wednesday, neither Aramco nor the Saudi Energy Ministry had said publicly whether anything was damaged.
Why Ras Tanura matters
For Saudi exports, few places matter more. Tankers collecting Saudi oil for foreign buyers call mostly at Ras Tanura's Gulf terminal or at Yanbu, the kingdom's Red Sea port. The refinery on the same site handles 550,000 barrels a day.
This is not the first scare. Aramco idled some refinery units on March 2 after a small fire there, which Saudi state media blamed on falling wreckage from two drones brought down by air defenses.
Tuesday's claim also fits a pattern. Over the past week the Houthis have aimed drones and missiles at the Shaybah processing plant and at the East-West Pipeline, the route Riyadh uses to send crude west to the Red Sea and around the Strait of Hormuz.
What the Journal reported
The second driver came from Washington. According to the Journal, US officials want several Gulf partners ready for what the paper called a "short, intense" round of strikes on Iran, one that could begin once the midterm vote is over.
The final call is Trump's, and the paper says he favors going big. Plants that build Iran's missiles and drones are reportedly among the possible targets, along with energy infrastructure and heavily protected nuclear research sites. By the paper's account, the military is already getting ready. Troops have been moved back from bases within easy reach of Iran, munitions stocks are being rebuilt, and a Patriot air defense battery is on its way from Texas.
The White House would not discuss "sensitive military plans that may or may not exist." Trump has ruled out any attack before Election Day. He has hinted at more, though. Speaking at a campaign event last week, he raised the idea of another "little Epic Fury." Epic Fury was the name given to the joint US and Israeli campaign against Iran that began on Feb. 28.
Tehran is promising a stronger reply this time. Abdollah Haji Sadeghi, the supreme leader's representative in the Revolutionary Guards, used the words "harsher and more devastating" to describe how Iran would answer another US attack, Tasnim reported.
Diplomacy stalls
Talks have not filled the gap. Envoys from Saudi Arabia, Turkey and Pakistan sat down with Iranian leaders in Tehran on Monday, and the only public outcome was a pledge to keep talking.
The visit was not empty-handed. Field Marshal Asim Munir, Pakistan's army chief, brought a peace plan with him. Trump backs it, a Pakistani official told Reuters. Pakistan would also guarantee any deal Iran signs, alongside Qatar, Saudi Arabia and Turkey.
Optimism about those talks had weighed on Brent on Tuesday. ING's analysts think prices could ease even if no deal is reached. "If we get past the elections without renewed strikes on Iran, that might be enough for the market's risk premium to start eroding," they wrote.
US supplies keep tightening
Government data released Wednesday morning pointed to tighter US crude supply. Analysts in a Reuters survey had expected almost no change. Instead, the Energy Information Administration counted 1.9 million fewer barrels of commercial crude, leaving 410.6 million in storage for the week to Oct. 23. Even Cushing, Oklahoma, the storage hub where WTI contracts are delivered, gave up 624,000 barrels.
Exports were the big swing factor. The EIA put crude exports at 4.85 million barrels a day, up 1.4 million from the prior week, and David Russell of TradeStation said "exports took supplies away from the US." Not everyone trusts that number. "EIA appears to have significantly overestimated crude exports," said Matt Smith, lead oil analyst at ship tracker Kpler. By Kpler's count, about 1 million fewer barrels a day actually left.
Fuel tanks told a mixed story. Gasoline went the other way, with a 3.9 million barrel build where analysts had looked for a small draw. Diesel and other distillates fell 1.5 million.
What to watch
- The Federal Reserve's rate decision, due at 2 p.m. ET on Wednesday
- Any word from Aramco or the Saudi Energy Ministry on damage at Ras Tanura
- Sunday's Nov. 1 meeting of seven core OPEC+ members, with no change to output targets expected
- US midterm elections on Tuesday, Nov. 3