Markets
Brent Settled at $116.72, Its Highest Since April, as Attacks on Saudi Arabia Continued. The Energy Sector Closed at a Record and SLB Rose 7%
Brent crude rose $3.55, or 3.1%, to settle at $116.72 a barrel on Friday, its highest close since April 29. WTI added 3.8% to $103.27. Houthi attacks on Saudi Arabia's Yanbu port, an oil field and an airport, and reports of renewed US strikes on Iran, drove the move. Energy was the only S&P sector at a record, with SLB up 7.08% after its beat. Gold slipped below $4,000 and natural gas fell 5.6%.
Oil finished the week where Thursday's attacks had pointed it. December Brent rose $3.55, or 3.1%, to settle at $116.72 a barrel on October 23, its highest close since April 29 and more than 6% above where it ended the previous week; Bloomberg noted it is now up more than 85% this year. December WTI rose $3.80, or 3.8%, to $103.27, back above $100 for the first time since Tuesday. The gap between the two benchmarks narrowed slightly to $13.45 a barrel, still about three times its usual width.
The driver was the same front that opened on Thursday, on land rather than at sea. The Houthis claimed further attacks on Saudi Arabia, including the Red Sea port of Yanbu, an oil field and an airport, and Saudi Aramco evacuated its headquarters in Dhahran, Reuters and Bloomberg reported. Traders were also pricing a report in the New York Times that the United States and Israel have drawn up plans for renewed strikes on Iran after the midterm elections, in a conflict now nearing its ninth month. Crude exports through the Strait of Hormuz are close to pre-war levels, but shipments of refined products from the Gulf remain constrained. "Weekend escalation fears are adding fuel," said Rebecca Babin of CIBC; options hedging by dealers amplified the move into the settle.
Equity investors followed the barrel. The S&P 500 energy sector rose about 2.5% to a record high on a day when roughly three in four stocks in the index fell. SLB led it, up 7.08% to $53.06, after adjusted third-quarter earnings of 64 cents a share against 62 cents expected and revenue of $9.45 billion against about $9.27 billion. Halliburton rose 5.21%, ConocoPhillips 3.55% and Chevron 2.88%, enough to add about 40 points to a Dow that lost 653. Airlines, which buy what the oil companies sell, fell on fuel costs.
Two other commodities moved the other way. December gold futures fell 1.3% to settle at $4,007.90 an ounce, and spot gold traded below $4,000, at $3,998.49 in the New York afternoon, a weekly loss of about 4%; silver fell about 1% to near $54. Higher oil keeps the Federal Reserve leaning towards a December rate increase, and a metal that pays no interest suffers when rates are expected to stay high. Natural gas fell 5.6% to $2.64 per million British thermal units, about 15% lower on the week, because the Gulf conflict affects crude and products far more than the US gas market.
The settle sets up the weekend as the variable. Oil markets close on Friday afternoon and reopen on Sunday evening, and two days of headlines from the Gulf will be priced in a single opening print. The risk runs both ways: a further strike on Saudi infrastructure would test April's highs, while a mediation report of the kind that ended WTI's eight-session rise earlier this week could undo a week's premium in an hour.