Oil prices surged this week to their highest level in five months, with Brent crude topping $110 a barrel as attacks tied to the Middle East raised fears of tighter supply. American drivers have not yet seen the full effect. Gasoline has eased slightly, but diesel remains above $6 a gallon.
Key Highlights
- Brent hit a five-month high of $110.70 on Monday and traded near $110 on Thursday, October 22, according to AGBI and Reuters.
- AAA’s national average for regular gas was $4.26 a gallon on October 21, down seven cents on the week, Yahoo Finance reported.
- Diesel averaged more than $6.30 on October 16, nearly $2.70 above a year earlier, according to The Hill, citing AAA.
- Saudi authorities have not confirmed Houthi claims of strikes on oil sites, according to coverage summarizing Reuters.
What Is Driving Prices Higher
Brent rose $1.29, or 1.2%, to $110.11 early Thursday, and U.S. West Texas Intermediate gained 97 cents to $98.12, Reuters reported. More Houthi attacks in Saudi Arabia, which Reuters said killed three people, led the United States to order some diplomats and family members to leave its missions there.
Reuters, citing Kpler data, counted at least 18 attacks on shipping in two weeks. LSEG analysts warned that Iran is targeting tankers beyond the Strait of Hormuz, including in the Gulf of Oman.
CNBC reported that Brent first touched $110 on October 16 as Iran escalated attacks in Hormuz, Houthi militants fired missiles at Saudi Arabia and Ukraine vowed to keep striking Russian refineries. A Saudi military spokesman said several missiles were intercepted, including one headed for the Yanbu export terminal.
What It Means at the Pump
Gas has not followed crude higher, at least not yet. AAA’s national average was $4.26 on Wednesday, down seven cents on the week and 21 cents on the month, Yahoo Finance said. It has stayed above $4 since the end of July, and October is on track to set a record.
AAA said earlier this month that this is the first year the national average has topped $4 in October. Oilgasprices.com notes that pump prices generally track crude with a lag of one to two weeks, so recent crude gains may not yet show up at the pump.
Diesel and the Wider Economy
Diesel has been hit harder. CNBC said it has surged this year because of Ukrainian strikes on Russian refineries and Iranian strikes on Middle East energy sites. Oilprice.com reported the Trump administration is pushing refiners to boost diesel output. The administration also waived Russia sanctions last week, as we reported in our earlier coverage.
Energy costs are also feeding inflation concerns. The National reported that analysts widely expect a second straight Federal Reserve rate hike. For the broader picture, see our report on U.S. inflation and the cost of living.
Watch: Market Coverage
CNBC posts market and energy coverage on its YouTube channel.
What Remains Uncertain
The Houthi claims have not been independently confirmed in the reporting reviewed. Prices change daily, and the extent of any supply loss is unclear. ING analysts noted that prices remain well supported even though Persian Gulf flows have been relatively strong, according to Oilprice.com.
What to Watch Next
- Houthi-Saudi developments and any further U.S. embassy moves.
- Shipping attacks in and beyond the Strait of Hormuz.
- Whether pump prices rise to follow crude.
- The Federal Reserve’s next meeting.
Sources: Reuters, AGBI, CNBC, Yahoo Finance, The Hill, AAA, The National, Oilprice.com. This article will be updated as more information is confirmed.