Brent tops $108 and WTI nears $100 as Houthi strikes on Saudi oil threaten supply

Rack prices are climbing because the crude underneath them is. WTI is near $100 and Brent is around $108 to $111, with the Brent-WTI spread out to $5. Every cent of that flows to the terminal, and jobbers are already paying more to refill than they paid to sell last week.

The Saudi risk

Houthi strikes on Saudi oil infrastructure are the reason Brent has $108 on the screen. The market is pricing in the chance that Saudi production takes a hit, and when the world's swing barrel looks shaky, every benchmark firms up.

For a US marketer this lands twice. Imported crude costs more, and domestic refiners pay more for the grades they can't pull from the Permian. Both show up in your replacement cost before they show up in your margin.

Saudi output could steady if the strikes stay limited to facilities that come back fast. If they don't, the premium already in Brent may stick.

Russia's exports

Russia's seaborne crude exports fell to their lowest four-week average in a month, averaging 3.59 million bpd through October 18, down 110,000 bpd. The Baltic port of Primorsk stopped loading for several days, which dropped weekly shipments 390,000 bpd to 3.13 million, the lowest since March. Just 31 tankers loaded 21.91 million barrels.

Fewer Russian barrels on the water tightens the global pool and gives benchmarks another reason to hold their bid. None of those barrels were heading to US terminals, but the price they set does.

Freight

Shipping costs are at record highs after the Iran war scrambled trade routes and tied up supertankers on long shuttle runs through the Strait of Hormuz. Ship-to-ship transfers in the Gulf of Oman are holding vessels for weeks.

Asian buyers have responded by booking smaller tankers and locking in long-term charter deals, per refining and trading sources cited by Reuters. The fleet is stretched that thin.

For US operators the freight bill is buried in the landed cost of imported crude and products. It works slowly, but it works one direction right now, and that direction is up.

What to watch

Whether Saudi output holds through the Houthi campaign is the question that moves everything else this week. Watch for Primorsk to resume loading, which would put Russian volumes back near 3.59 million bpd and take some heat out of the benchmark. Watch the Brent-WTI spread too. If it widens past $5, domestic crude gets relatively cheaper and your branded supplier's formula may lag the imported grades. Rack offers could ease if the strait stays open and Saudi facilities come back online.