Oil prices fell over 1% on Monday after surging to near six-month highs late last week. Despite the decline, prices remained elevated, with Brent crude hovering near $115 per barrel as continued attacks on Saudi Arabia kept concerns over global oil supplies alive.The US Federal Reserve’s upcoming policy decision is another factor investors will watch as crude enters a potentially volatile week.WTI crude fell 1.71%, or $1.77, to $101.5 per barrel, while Brent crude declined 1.41%, or $1.65, to $115.1 per barrel.The decline followed a sharp rise on Friday, when prices settled nearly $3 higher after Houthi attacks in Saudi Arabia raised concerns about energy supplies. Brent recorded a 6% gain for the week, while WTI advanced 2.3%, taking prices close to six-month highs.The security situation remained tense over the weekend. The Houthis said they had attacked a Saudi airport and oil facilities on Saturday, while Saudi Arabia reported intercepting additional missiles and drones on Sunday. The country’s main airport resumed partial operations the same day, following damage from an earlier round of Houthi attacks. The militant group has vowed to continue targeting the facility.
Strait of Hormuz remains a key concern
Developments around the Strait of Hormuz and the security of energy infrastructure are expected to influence crude prices in the coming days. Brent has already crossed $117 per barrel, and analysts said any disruption to energy facilities or shipping through the strait could push global prices towards $120 per barrel. A credible move towards de-escalation, however, could lead to a sharp correction.“The near-term bias remains bullish but highly headline-driven; traders should avoid chasing sharp rallies and monitor geopolitical developments, Fed guidance and weekly inventory data for directional confirmation,” said Ajit Mishra, SVP – Research at Religare Broking.The latest price rally has been driven by escalating US-Iran tensions, fears of renewed military action, attacks on Saudi infrastructure and threats to important shipping routes, Mishra said. These developments have sustained the geopolitical risk premium in oil prices.Navneet Damani, head of research – commodities at Motilal Oswal Financial Services Ltd, said, “The rally gathered pace as attention returned to escalating attacks around the Hormuz and Saudi Arabia, reviving concerns over energy infrastructure and export security.”Further uncertainty has emerged from reports that the US and Israel had prepared plans to target Iranian energy infrastructure, including nuclear facilities near Natanz, after the US mid-term elections on November 3. Iran warned of repercussions if Washington and Tel Aviv launched an attack, adding to concerns in the market.
Supply measures fail to reverse the rally
Efforts to ease supply concerns have so far done little to bring prices down. The International Energy Agency has indicated its readiness to release more strategic stocks, while the G7’s additional 100 million barrels largely involves accelerating an existing release programme. The first Russian diesel cargo bound for the US has also failed to reverse the upward trend.According to Damani, market participants are now looking for evidence that these measures will translate into meaningful additional supplies, rather than responding to announcements alone.“Although crude flows through Hormuz have shown some recovery, elevated freight costs, constrained regional shipments and persistent security threats continue to undermine export reliability. With physical supply yet to normalise, the risk premium remains elevated, and the balance of risks continues to favour the upside, though credible progress towards de-escalation could still trigger sharp profit-taking,” Damani added.The market will also track weekly US inventory estimates from the American Petroleum Institute and the US Energy Information Administration, alongside Cushing crude inventories. These figures could offer further direction as traders assess the state of supply.
