- Brent crude stayed above $108 a barrel near a four-month high due to Middle East disruptions
- Saudi Arabia canceled some September oil shipments after East-West pipeline was shut down
- Libya's oil production halted at two fields amid protests, adding to global supply concerns
Brent crude held above $108 a barrel on Wednesday, remaining near a four-month high as disruptions to Middle Eastern oil infrastructure added to concerns over global supply. WTI crude stayed above $105 a barrel as markets assessed the widening impact of attacks on energy assets and the risk of prolonged supply interruptions.
Saudi Arabia has reportedly cancelled some September oil shipments to European customers after drone attacks forced the shutdown of its East-West pipeline. There is still no clear timeline for the pipeline's full restart. Brent had risen more than 2% on Tuesday after the outage, with Reuters reporting that fresh attacks by Houthis on Saudi Arabia were adding to concerns over the duration of the disruption.
Libya's national oil company has suspended operations at two oilfields and a pumping station amid protests, adding another source of disruption to an already tight market.
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Oil prices are also feeding directly into the global inflation and interest-rate outlook. The US 10-year Treasury yield briefly touched 5.04% on Tuesday, its highest level since July 2007, before easing towards 5%. Rising crude prices have strengthened concerns that inflation could remain elevated and reinforced expectations of a Federal Reserve rate hike.
That makes Wednesday's Fed decision the next major market event. Investors are watching not just the rate decision but also the central bank's guidance on the path of policy as higher energy costs threaten to keep inflation sticky.
Gold has also come under pressure as higher bond yields raise the opportunity cost of holding the non-yielding asset, while the dollar has strengthened.
Meanwhile, Japan's latest trade data highlighted the economic impact of higher energy prices. August imports jumped 28% YoY, faster than the 19.3% rise in exports, leaving a ¥1.11 trillion trade deficit. Higher crude prices lifted the value of Japan's energy imports.
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