ING analysts Warren Patterson and Ewa Manthey note that Oil prices remain well supported as ICE Brent trades back above $110/bbl following new attacks on Saudi Arabia. They highlight that Kuwait is exporting as much crude as before the war while producing more than 2m b/d, but refined product shipping issues and elevated US inventory draws keep a sizeable risk premium in place.

Brent holds firm on supply risks

“Despite the volatile environment, oil flows from the Persian Gulf are holding up. According to the CEO of Kuwait Petroleum Corp, Kuwait is exporting as much crude oil as before the war and producing more than 2m b/d. However, he admitted that the shipping of refined products is more of an issue.”

“While oil flows have remained elevated, President Trump has expressed concern that oil prices remain elevated due to supply risks. This leaves plenty of uncertainty over the sustainability of flows. The sizeable risk premium currently embedded in prices is unlikely to fade until clear signs of de-escalation emerge and reassure investors that regional supply will remain uninterrupted.”

“EIA inventory data shows US crude oil inventories fell by 3.06m barrels over the last week. There was anadditional 300k-barrel fall in Strategic Petroleum Reserves. The data still reflects the impact of hurricane activity in the US Gulf of Mexico, with US oil production estimated to have fallen 410k b/d week-on-week.”

“Oil prices remain well bid, with ICE Brent back above $110/bbl this morning following additional deadly attacks on Saudi Arabia. Drones struck the Shaybah oilfield and Dammam’s international airport. An oil processing plant was the target of the attack.”