Freedom: Brent could return above $100 despite the success of Yemen’s army

Oil fell after Yemen’s government forces announced they had regained control of the coast of the Bab el-Mandeb Strait. During the day on October 6, Brent was down 2.2% to $98.10 per barrel, while U.S. WTI was down 2.47% to $87.24.

Freedom Broker lead analyst Natalia Milchakova links the decline in quotes to expectations of increased oil exports from Saudi Arabia. However, in her view, the threat of Houthi attacks on oil infrastructure and the incomplete utilization of the East–West oil pipeline keep supply risks in place and could lift Brent back to $100 per barrel and above.

During the day on Tuesday, October 6, at the time of the analyst’s comment, Brent was down 2.2% to $98.10 per barrel, while U.S. WTI was down 2.47% to $87.24.

Yemen statement eased concerns over oil supplies

Yemen’s government forces reported regaining control of the coast of the Bab el-Mandeb Strait. The offensive was carried out with support from Saudi air power. The military said it had pushed the Houthis out of most coastal areas and reached the outskirts of the port city of Mocha.

The Bab el-Mandeb Strait connects the Red Sea with the Gulf of Aden. A shipping route for oil and petroleum products between the Indian Ocean and the Suez Canal runs through it. Regaining control of the coast reduces some of the concerns over shipping security.

Milchakova attributes the decline in oil quotes primarily to expectations of increased exports from Saudi Arabia. Additional supplies could reduce the shortage of crude oil and petroleum products in importing countries.

Attacks on Saudi infrastructure keep risks in place

At the same time, the Houthis reported strikes on a Saudi Aramco refinery, airports, and a military base in Saudi Arabia. The Saudi side did not confirm these claims, Oninvest reports citing AFP.

Reports on the status of the East–West oil pipeline also differ: AFP sources spoke of a new shutdown due to attacks, while Bloomberg reported it was operating as normal.

The pipeline makes it possible to deliver crude to the port of Yanbu on the Red Sea bypassing the Strait of Hormuz. Milchakova believes that its incomplete utilization and the continuing threat of attacks limit the scope for increasing exports. Therefore, the initial price decline may give way to a rebound of Brent to $100 per barrel and above.

Freedom previously linked the drop in oil to the success of the operation against the Houthis

In early October, Freedom Broker noted that the defeat of the Houthis could lower oil quotes. Senior analyst Sergey Pigarev explained this by a reduced threat of export disruptions through the Red Sea. He also suggested that such a scenario would weaken Iran’s position in negotiations with the U.S.

Earlier, Freedom Broker reported that oil rose by about 3% after a Houthi missile strike on Saudi Arabia. In that trading session, Brent climbed 3.4% to $106.60 per barrel amid supply concerns.

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