Week in Review – Oil Prices Hit Five-Month Highs Despite Recovery in Middle East Exports

Oil prices moved higher on Friday as renewed tensions in the Middle East raised concerns about potential supply disruptions. Brent crude reached $115.16 per barrel, its highest level since May 4, before trading at $114.99, up 1.5%. West Texas Intermediate (WTI) also increased 1.8% to $101.27 per barrel. The gains followed reports of Houthi attacks targeting Saudi Arabia, continued security concerns in the Strait of Hormuz, and an oil spill reported off the coast of the United Arab Emirates. Despite a significant recovery in Middle Eastern crude exports, rising transportation costs and continued geopolitical uncertainty remain major factors affecting oil prices.

Crude shipments from the Middle East have rebounded in recent months, even as attacks on tankers continue. According to Kpler data, regional oil exports averaged 17.3 million barrels per day (bpd) in October, up from 16.4 million bpd in September and above the 16.9 million bpd recorded before the conflict began in February. Shipments through the Strait of Hormuz also increased to 11.7 million bpd this month, compared with 9.75 million bpd in September. Although this represents a substantial improvement from April, when flows fell below 1 million bpd excluding Iranian oil, volumes remain at approximately 82% of pre-war levels.

Much of the recovery has been supported by tanker convoys traveling along the Omani coastline under U.S. naval protection. Shipping data also indicates that approximately one-third of crossings continue using the northern route controlled by Iran. Saudi Arabia has contributed to the recovery through increased shipments from its Red Sea port of Yanbu, where exports averaged 3 million bpd in October. This follows disruptions caused by an attack on the pipeline connecting the country's eastern oilfields to its western coast last month.

However, the increase in crude shipments has not eliminated concerns about transportation risks. The United Kingdom Maritime Trade Operations reported 12 attacks in or around the Strait of Hormuz last week, the highest weekly total recorded. Shipping expenses also remain elevated, with benchmark tanker rates for transporting 2 million barrels of crude from the Middle East to China reaching approximately $1.4 million per day, more than 12 times pre-war levels. Insurance costs have also climbed to around 10% of cargo value, compared with roughly 3% before the conflict. Meanwhile, freight rates for crude tankers traveling from the U.S. Gulf Coast to China have more than tripled since the conflict began, reaching upward of $60 million earlier this week.

Geopolitical developments are adding another layer of uncertainty. A Saudi-led coalition reported intercepting two Houthi drones targeting the southern region of Saudi Arabia, along with a ballistic missile launched toward Najran. Saudi Aramco also ordered the evacuation of its headquarters in Dhahran as fighting intensified between Saudi-backed forces and the Houthis. Meanwhile, authorities in the United Arab Emirates reported an oil spill off the coast of Umm Al Quwain, although the cause has not been confirmed.

Attention is also turning toward upcoming elections in Israel and the United States. Israel's general election is scheduled for October 27, followed by the U.S. midterm elections on November 3. President Trump has stated that the United States will not attack Iran before the U.S. elections, although additional American warships have been deployed to the region amid warnings of potential future strikes against Iranian nuclear facilities. Diplomatic efforts involving Pakistani and Qatari mediators are continuing.

In the United States, the administration has also invoked the Defense Production Act in an effort to expand domestic petroleum product production and prevent shortages that could affect national defense capabilities.

Beyond crude oil, diesel prices remain a major concern for businesses and consumers. According to the Energy Information Administration (EIA), the national average diesel price increased nearly 10 cents last week to $6.28 per gallon, reversing two consecutive weeks of declines and remaining near record highs. The Trump administration has introduced several measures intended to ease costs, including temporary changes to federal reporting and recordkeeping requirements related to dyed diesel, financial assistance for farmers, and efforts to bring additional diesel supplies into the market.

One of those efforts involves a new agreement between the United States and Russia to resume diesel shipments. A tanker carrying 40,000 metric tons of ultra-low sulfur diesel departed Russia's Baltic port of Primorsk on October 22 and is expected to arrive in New York on November 7. The shipment would mark the first U.S. import of Russian petroleum products since the ban introduced in 2022.

Under the agreement announced on October 9, Russia plans to release an initial 300,000 metric tons, equivalent to approximately 2.25 million barrels, to U.S. and global markets, followed by 500,000 metric tons in November and an additional 1 million metric tons thereafter. Russia has also lifted its self-imposed restrictions on diesel exports, with additional shipments already heading toward traditional markets, including Turkey and Brazil. Russian Deputy Prime Minister Alexander Novak has indicated that the country could return to its usual diesel export levels of 3 million to 3.5 million metric tons per month by the end of the year.

For now, energy markets continue to reflect a combination of recovering crude exports, elevated transportation expenses, supply disruptions, and geopolitical tensions. Brent crude is heading toward its third consecutive weekly gain, while shipping risks and uncertainty surrounding the Middle East conflict remain central concerns. Additional diesel shipments and diplomatic negotiations are among the developments being watched as crude and refined product markets continue to respond to changing supply conditions.

Prices in Review

Crude prices started the week with an increase before shifting lower through midweek. Prices opened at $101.65 on Monday and climbed to a weekly high of $103.43 on Tuesday. The upward movement reversed on Wednesday, when crude dropped to $98.19, followed by another decline to $97.78 on Thursday. Prices recovered to $99.10 on Friday, but remained below Monday's level. Overall, crude prices decreased by $2.55 per barrel, representing an approximate 2.5% decline for the week.

Diesel prices moved higher during the first half of the week before declining on Thursday. Starting at $4.9140 on Monday, prices edged up to $4.9340 on Tuesday and reached a weekly high of $4.9641 on Wednesday. Prices then dropped to $4.7967 on Thursday, before rebounding to $4.9525 on Friday. Despite the fluctuations, diesel prices increased by $0.0385 per gallon, representing an approximate 0.8% gain for the week.

Gasoline prices trended lower early in the week before showing signs of recovery. After opening at $3.2190 on Monday, prices eased to $3.1810 on Tuesday and fell further to $3.1332 on Wednesday. Prices then moved higher to $3.1476 on Thursday and continued recovering to $3.1770 on Friday. Despite the late-week rebound, gasoline prices declined by $0.0420 per gallon, representing an approximate 1.3% decrease for the week.