Oil prices edged higher on Wednesday as the International Energy Agency (IEA) warned that diesel supply constraints could persist well into 2027, while escalating tensions between Saudi Arabia and Yemen’s Houthi militants added to concerns over disruptions to global energy supplies.
Brent crude futures were trading at $106.16 a barrel, up roughly 0.3%, while West Texas Intermediate (WTI) crude rose around 0.9% to $95.04 at 6:00 a.m. ET.
The gains came as traders assessed the outlook for fuel supplies ahead of the winter demand season and weighed warnings from prominent investor Paul Tudor Jones that oil prices may have further room to climb.
IEA warns diesel crunch to continue
IEA, in its October Oil Market Report released Wednesday, warned that constraints in the diesel market could keep prices elevated well into next year.
The agency said the global oil market was entering the peak winter demand season without sufficient inventory buffers, following prolonged disruptions to exports from the Middle East and Russia.
IEA data showed that global diesel exports fell by 700,000 barrels a day in September compared with the same month a year earlier.
Increased supplies from other sources only partially offset a loss of 1.3 million barrels a day from Russia and the Middle East, the agency said.
The persistent diesel shortage is adding to concerns about fuel costs, particularly in the United States, where rising prices have become a political issue for President Donald Trump’s administration ahead of the November 3 midterm elections.
US diesel prices crossed $6 a gallon for the first time last month and continue to stay elevated.
Saudi-Houthi conflict adds to supply risks
Geopolitical tensions in the Middle East are providing another source of support for crude prices, as fighting between Saudi Arabia and the Iran-backed Houthi militants in Yemen continues to escalate.
Saudi Arabia said Wednesday that an attack on an Aramco administrative building in the kingdom’s east had sparked a “limited fire” at the site. No casualties were reported.
The incident followed a Saudi-led coalition attack on Houthi energy terminals and fuel reserves in Yemen.
Earlier, debris from intercepted Houthi missiles injured four people, including a child, in the Saudi capital, Riyadh.
The latest developments have heightened concerns about further attacks on energy infrastructure and the potential for disruptions to oil supplies.
The risk extends beyond production facilities to shipping routes and transport infrastructure, which remain critical to maintaining the flow of crude and refined petroleum products through the region.
Paul Tudor Jones sees room for oil to rally
Billionaire investor Paul Tudor Jones has also warned that crude prices may not have reached their peak, raising the possibility of another sharp increase if geopolitical uncertainty persists.
“I’m long oil, bullish on oil. I think it can rally another $20 or $25,” Jones told CNBC, saying that if a breakthrough in the Middle East was to be achieved, it would have been achieved by now.
His outlook suggests that crude could rise substantially from already elevated levels as investors continue to assess the risks associated with the war between the United States and Iran and the possibility of further escalation.
Jones also warned that a sustained rally in oil prices would be unwelcome for equity markets.
Higher energy costs can squeeze household purchasing power and business profit margins while making it harder for policymakers to bring inflation under control.
A further increase in crude prices could therefore create additional pressure across the economy and financial markets.
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