Oil prices surge toward $110 on Middle East and US supply drops
Crude oil prices surged toward $110 a barrel during the week ended October 16, driven by Middle East supply disruptions and a sharp, unexpected plunge in U.S. commercial crude inventories. Brent crude touched $110 before settling at $109.86 a barrel, marking a 3.7% single-day increase and a nearly 5% gain for the week. West Texas Intermediate climbed 3.5% to $101.41 a barrel, capping a weekly surge of more than 10% to reach its highest level since September 17.
US Crude Inventories Drop as Hurricane Halts Production
The U.S. Energy Information Administration reported that commercial crude inventories dropped by more than 8 million barrels for the week ended October 9. The figure far exceeded analyst forecasts, which had anticipated a draw of only about 290,000 barrels. Hurricane Isaias forced operators along the Gulf of Mexico coast to temporarily halt production, cutting daily U.S. crude output by roughly 300,000 barrels to 13.7 million barrels. Crude imports declined by 790,000 barrels per day during the same period.
Refineries increased their utilization rate to 93.5%, up 0.8 percentage points from the prior week, continuing to process rising volumes of crude despite the tightening feedstock supply. The resulting shortfall forced operators to draw heavily from storage, pushing commercial inventories about 3% below the five-year average. Refined product inventories, including diesel, also fell by 2.5 million barrels. Pointing to this trajectory, Samsung Futures senior analyst Kim Kwang-rae observed that refinery feedstock requirements remain strong.
Middle East Escalations and Strait of Hormuz Disruptions
Geopolitical tensions intensified across the Middle East as Iran-backed Houthi forces launched multiple attacks targeting Saudi Arabia. A Saudi military spokesperson confirmed the kingdom intercepted several missiles across the Red Sea, including one aimed at the Yanbu oil export port, alongside three drones destroyed over Riyadh and the southern region. Reuters reported that the October 16 interception at Yanbu caused no damage to oil and gas infrastructure. Earlier incidents included a missile strike on a Saudi Aramco administrative building in Dhahran on October 14 and an attack on Riyadh’s international airport on October 10 that killed 12 people and injured more than 300.
In the Strait of Hormuz, at least nine oil tankers and cargo vessels faced attacks since the start of the week. Data from the International Maritime Organization indicated three crew members were injured and two went missing. Kpler figures showed oil volumes shipped through Hormuz reached 9.4 million barrels per day in the week ended October 14, representing only about 70% of pre-conflict averages. Consultancy Energy Aspects stated that oil prices reversed higher on fears of escalating conflict and unverified Israeli reports of a potential preemptive strike by Iran, keeping the market vulnerable to prolonged disruptions.
Russia Ukraine Refinery Strikes Push up Diesel Prices
The energy infrastructure ceasefire between Ukraine and Russia collapsed as the Kremlin continued strikes on Ukrainian facilities, prompting Ukrainian President Volodymyr Zelenskyy to resume attacks on Russian oil refineries. Two industry sources reported that an October 15 drone strike compelled Russia’s Ryazan facility to shut down its primary crude distillation unit, CDU-6. U.S. diesel prices averaged $6.33 per gallon on October 16, up more than 70% from the same period a year earlier, according to AAA data. Dennis Kissler, senior vice president of trading at BOK Financial, pointed to ongoing Middle East flare-ups and questions over Russian diesel supplies as key drivers keeping traders in buy mode.
To cool the market, the International Energy Agency agreed on October 15 to accelerate the release of emergency stockpiles, adding more than 20 million barrels of diesel to global supply. On October 16, the Department of Energy likewise requested a Strategic Petroleum Reserve exchange of up to 17 million barrels of oil.
Asian import-dependent economies felt immediate pressure. Japan’s Agency for Natural Resources and Energy reported that over 90% of the country’s crude oil imports originate in the Middle East, though Japan maintains roughly eight months of oil reserves. Meanwhile, Taiwan’s state-run CPC Corporation announced on October 17 that gasoline and diesel rates would remain unchanged for the October 19–25 week, extending the price freeze to a second straight week. Current retail costs sit at NT$31.2 per liter for 92-octane unleaded gasoline and NT$29.9 per liter for diesel, with the island nation sourcing its LNG from the United States, Australia, and Qatar.
