Gulf hurricane joins geopolitical risks to keep oil near $100

The hurricane may have its greatest impact on refined products rather than on crude itself. Should Gulf Coast refineries close before the storm arrives, they will stop purchasing crude, potentially weighing temporarily on US crude prices while gasoline and diesel supplies tighten. That scenario would widen crack spreads — the difference between crude and the fuels derived from it — at a time when diesel is already at record highs and Western governments are preparing to release emergency stocks. Outside the US, Houthi attacks and Washington's more forceful stance on Iran sustain a geopolitical premium in Brent that rising Gulf export volumes have not yet eroded. For now, the balance of risks points to prices remaining near $100 rather than declining, unless the storm weakens or tensions in the Middle East subside.

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Oil prices are caught between recovering Middle East supply and an expanding roster of threats, and this week a Gulf of Mexico hurricane added to the list.

In summary:

• On Wednesday, oil prices gained as a Gulf of Mexico storm, forecast to become the first Atlantic hurricane of 2026, threatened US energy infrastructure.
• Offshore fields in the storm's path account for 15% of US crude output and 5% of natural gas production, and six refineries may be impacted.
• Houthi strikes on Saudi airports in Jazan and Najran heightened tensions, despite rising crude exports from the Middle East.
• The Saudi East-West Pipeline carried close to 6 million barrels per day, while Vitol reported that about 12 million bpd of crude had left the region by tanker over the past week to 10 days.
• US President Donald Trump stated that it was unclear who was in charge of Iran, indicating scant headway in mending relations.

On Wednesday, oil prices climbed as a storm heading toward US producing areas and intensified Houthi attacks on Saudi Arabia offset indications that Middle East crude supply is bouncing back. Brent stayed near the $100 mark it regained this week.

US forecasters indicated that the storm developing in the Gulf of Mexico was likely to become the first Atlantic hurricane of 2026 within two days and would probably strike oil and gas infrastructure. Offshore fields in its path represent 15% of US crude production and 5% of natural gas output. Six refineries may also be affected. Gulf Coast states contain roughly half of the nation's refining capacity, around 18 million barrels per day, making the storm as significant for fuel supply as for crude. One analyst called it an unwelcome complication for a market already contending with numerous supply issues.

The risk of refining disruptions is particularly acute at this moment. Diesel prices have hit record highs, and the Group of Seven last week agreed to release 100 million barrels of diesel and crude from strategic reserves, with the International Energy Agency scheduled to meet next week to finalise the arrangement. Another analyst noted that attacks and refinery shutdowns would probably keep refining margins high, and that without significant de-escalation, crude would remain near $100.

On the supply front, Middle East flows have been recovering. Saudi Energy Minister Prince Abdulaziz bin Salman stated that the East-West Pipeline to the Red Sea port of Yanbu was transporting close to 6 million barrels per day, and the head of trading firm Vitol said that roughly 12 million bpd of crude and 2 million bpd of refined products had departed the region by tanker over the past week to 10 days.

These gains have been counterbalanced by fresh violence. Two attacks targeted Saudi airports on Monday evening as conflict with Yemen's Iran-backed Houthis intensified, with Saudi-backed Yemeni government forces launching an offensive against the rebels, backed by Saudi airstrikes.

Diplomacy provided scant relief. Trump said on Tuesday that no one knew who was leading Iran following the eight-month US-Israeli war, which led Iran's foreign ministry to assert that Washington fully understands how decisions are made in Tehran.

In the US, the American Petroleum Institute reported a crude stock decline of about 2 million barrels last week, contrary to analysts' predictions of an increase. Official figures from the Energy Information Administration are due on Wednesday at 10:30 am ET (14:30 GMT). Traders will also monitor the storm's path and whether Gulf producers start evacuating offshore platforms.