Oil Surges Past $110 as Houthi Drone Strike Near Saudi Shaybah Field Sparks Market Jitters

Oil prices extended their climb, surpassing $110 a barrel on Thursday. This surge follows a Houthi drone attack near Saudi Aramco's Shaybah oilfield, which has intensified concerns about potential supply disruptions. The Houthi rebels have been escalating their attacks on Saudi Arabia's energy infrastructure.

Brent crude saw a 1.7 per cent increase, adding $1.81 to reach $110.63 a barrel as of 7:36 am UAE time. West Texas Intermediate also gained, rising 1.4 per cent or $1.37 to $98.52.

The drone attack on Wednesday resulted in two fatalities and two injuries when debris from an intercepted drone fell near a processing plant at Shaybah, one of Saudi Arabia's largest oilfields. The Saudi Energy Ministry stated that the drone targeted the plant, but its debris struck a contractor's vehicle outside the facility, causing a fire. Importantly, operations at the plant remained unaffected.

Shaybah, situated deep within the Empty Quarter close to the UAE border, is responsible for producing approximately 1 million barrels of crude daily. This strike occurred just hours before another incident at King Fahd International Airport in Dammam, which led to one death and eight injuries, according to Saudi Arabia's civil aviation authority. The Houthis have not yet issued any statement regarding the airport attack.

These recent strikes follow a previous attack on Riyadh's main international airport earlier this month, which was the deadliest assault on the kingdom in over a decade. Furthermore, Saudi Arabia's critical East-West pipeline, a vital alternative to the Strait of Hormuz, has also been targeted. Reports indicate that crude flows were halted on October 5 after a Houthi strike damaged a pumping station located east of Riyadh. The pipeline, with a capacity of around 7 million barrels per day, transports crude from Saudi Arabia's eastern oilfields to export terminals on the Red Sea, enabling shipments to bypass the Strait of Hormuz.

In response to the escalating Houthi attacks on civilian airports and critical infrastructure, Washington has directed non-emergency government employees and their families to depart from Saudi Arabia. This expanding campaign is contributing to a geopolitical risk premium in oil prices, as the attacks threaten Saudi production facilities and alternative export routes that are already under strain due to the Iran war.