FX.co ★ CL/Crude Oil

West Texas Intermediate (WTI) crude oil prices managed to halt a three-day losing streak during Asian trading on Thursday, closing near $97.70 a barrel. This followed a drone attack on Saudi Aramco's strategic Shaybah oil field in the Eastern Province, which killed two people. The attack sharply escalated geopolitical tensions in the Middle East, exacerbating market concerns about potential energy supply disruptions and prompting the US government to order the evacuation of some diplomats and their families from its embassy in Saudi Arabia as a precautionary security measure. Meanwhile, diplomatic channels remain strained. Iranian Foreign Minister Abbas Araqchi stated on Wednesday that Washington must lift the naval blockade and demonstrate a clear and sincere commitment to resolving the current hostilities through diplomatic means. Araqchi emphasized that Tehran is theoretically prepared to resume formal talks and reiterated that Iran is ready to try diplomatic channels again if concrete evidence emerges that the United States genuinely desires a just and honorable solution to end the conflict permanently. Meanwhile, geopolitical rivalries have extended beyond the Middle East and continue to impact global energy markets. This week’s large-scale drone attacks by Ukrainian forces on key Russian oil infrastructure underscored this trend. This military action demonstrated Kyiv’s clear intention to systematically undermine Moscow’s ability to expand its lucrative diesel exports, directly challenging the framework of the recent trade agreement reached between Presidents Trump and Putin. Despite the persistent threat of severe supply disruptions, any further significant increases in crude oil prices are structurally constrained by the continued expansion of production and accelerated exports from the world’s major oil producers. Export flows from the Arabian Gulf region are rapidly recovering to pre-conflict levels, as evidenced by official data showing a substantial 7.9% increase in Saudi crude oil exports in August, the highest monthly figure since March. Furthermore, with Russia poised to deliver its first commercial diesel shipment to the US on Thursday, the global spot supply is expected to expand, indicating that alternative trade routes are adapting to regulatory and geopolitical shifts. Macroeconomic strategists at Brown Brothers Harriman (BBH) noted that despite ongoing adjustments across various asset classes in broader financial markets, global Brent crude prices have successfully maintained their recent strong gains near $110 per barrel. BBH also points out that global sovereign bond yields are showing a slight upward trend, while equity markets continue their recovery momentum, with particular focus on the European bond market, where the premium for 10-year French bonds compared to German bonds is rapidly approaching its highest level in 24 years. In the foreign exchange market, BBH observes that the US dollar is exhibiting mixed movements above its recent lows, primarily supported by interest rate differentials. Against this complex macroeconomic and geopolitical backdrop, foreign exchange analysts at Rabobank believe that the breakdown of traditional diplomatic frameworks portends prolonged instability in the Middle East, confirming that geopolitical risk premiums will remain high for the foreseeable future, impacting all oil-related assets.