Oil climbs to highest since mid-September as attacks in Saudi Arabia outweigh Trump's diesel deal

Canadian markets were closed for Thanksgiving on Monday, October 12, but oil kept moving. Brent crude futures settled up US$1.93, or 1.8%, at US$106.65 a barrel, their highest close since September 15, according to Reuters. U.S. benchmark West Texas Intermediate, the price most relevant to Canadian producers, settled at US$93.74, up US$1.89, or 2%.

The rally came as fresh violence in the Gulf overshadowed U.S. President Donald Trump's announcement of additional Russian diesel supplies.

What drove the move

"The sense of some kind of normality of exports from the Strait of Hormuz was shattered last week," said Bjarne Schieldrop, commodities analyst at SEB.

• The Iran-aligned Houthis claimed a Saturday strike on Riyadh's international airport that killed 13 people and wounded more than 300, with further attacks on Sunday.
• A tanker was struck by a drone near Sohar, Oman, and another was damaged while transiting the Strait of Hormuz, according to the U.K. Maritime Trade Operations agency.
• Ukrainian President Volodymyr Zelenskiy accused Russia on Monday of violating the energy-infrastructure ceasefire Trump had announced a day earlier.

The diesel deal that did not calm markets

Trump said on Friday that Russia would immediately supply more than 300,000 metric tons, about 2.25 million barrels, of diesel to global markets, with more to follow. Analysts were sceptical about the near-term effect. "The immediate impact of the deal is questionable, as Russia's refining capacity has been severely reduced," said Tamas Varga of PVM.

Diesel remains the tightest part of the market. Members of the International Energy Agency agreed on October 7 to speed up the release of emergency stocks under the 400-million-barrel collective action launched in March, with a priority on diesel, according to Fortune.

The Canadian angle

Canada is a large net exporter of crude, so higher prices tend to lift energy-company profits, royalties and government revenues, even as they squeeze households at the pump. The scale of the move over the past year is striking: Brent traded around US$63.49 a year earlier, according to Fortune's price tracker, meaning prices are up roughly 70%.

Higher oil also complicates the Bank of Canada's job. Energy prices feed directly into consumer inflation, at a time when the latest jobs report showed the labour market weakening.

The counter-argument

Some forecasters expect prices to ease. Goldman Sachs raised its December Brent forecast to US$90 a barrel from US$85, still well below Monday's level, and estimates the market is carrying a geopolitical risk premium of just over US$20 a barrel. It expects WTI to average US$81 in December. A risk premium can disappear quickly if tensions ease, which is why oil-driven rallies can reverse sharply.

What it means for Canadian households and investors

For drivers and anyone heating with oil, elevated crude prices typically translate into higher fuel bills, and pump prices tend to fall more slowly than they rise. Budgeting a cushion for transportation and heating costs this winter is prudent.

For investors, Canada's stock market already has heavy energy exposure through a broad TSX index fund. Chasing oil stocks after a geopolitical spike carries the risk of buying near a peak if the premium unwinds. This is general information, not personalized advice.

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