Brent Crude Price Today Nears $107 As Saudi Oil Output Falls And Houthi Threat Raises Supply Concerns

Two developments are keeping the oil market on edge as Brent crude prices remain above $100 a barrel. Saudi Arabia’s crude production fell by 1.9 million barrels a day (bpd) in August to 6.238 million bpd, the lowest level reported by the kingdom since 1990, while Saudi exports dropped to around 3 million bpd. The sharp fall in supply has added to concerns that the cushion available in the global oil market is narrowing.

Brent crude climbed to a four-month high of $109.97 earlier in the week before easing towards $107. The benchmark is still on track for a strong weekly gain as traders assess the impact of lower Saudi supply and continued disruption around key shipping routes.

The Saudi production figure, however, remains subject to a difference in reporting. While the kingdom's own data puts August output at 6.238 million bpd, OPEC's secondary-source estimates put Saudi production closer to 7.3 million bpd.

"Until now the market could argue this crisis was essentially about logistics and shipping. If production at the heart of OPEC has genuinely fallen this sharply, we are dealing with an outright loss of physical supply, and the cushion is disappearing fast," said Anindya Banerjee, Head of Research – Currency, Commodities and Interest Rates at Kotak Neo Research.

Houthi Advance Adds To Oil Supply Risks

The second risk is emerging around the Red Sea. Yemen's Houthis seized the port city of Mocha and are advancing towards the Hanish islands, increasing the threat to shipping through the Bab el-Mandeb Strait. The development comes as traffic through the Strait of Hormuz remains below normal levels, leaving the oil market exposed to risks around two major chokepoints.

"The market is now pricing not one chokepoint but two, and greater Houthi control of that coastline and its islands means a greater ability to monitor, threaten or disrupt shipping," Banerjee said.

The pressure is also visible in the physical market, with Chinese independent refiners buying more crude from alternative sources and premiums for some grades rising sharply. Shipping costs have also increased as traders compete for available vessels and crude supplies.

"The physical market is exceptionally tight, and the evidence is broad-based rather than anecdotal. Brent now has strong support at $100 to $102, and as long as prices do not close below $100, the breakout remains alive with targets of $115 and even $120," Banerjee said.

The oil rally is also adding to inflation concerns. US producer prices rose 0.4% month-on-month in August, taking the annual increase to 5.4%, while energy prices rose 4.2%. The rise in crude prices has also pushed US Treasury yields higher, adding another layer of pressure on global financial markets.

Key Levels To Watch

According to Kotak Neo Research’s September 11 report, MCX Crude Oil September futures were trading at Rs 9,859, with support at Rs 9,726, Rs 9,643 and Rs 9,376. Resistance is placed at Rs 9,993, Rs 10,075 and Rs 10,342.

For the October contract, the current market price was Rs 9,451, with support at Rs 9,339, Rs 9,269 and Rs 9,044, while resistance stands at Rs 9,563, Rs 9,633 and Rs 9,858.

The crude rally is also weighing on the rupee as India's import bill rises. The rupee closed at 95.46 against the US dollar on Thursday, down 38 paise, with elevated crude prices, foreign portfolio outflows and higher US yields adding to pressure on the currency.

"The rupee remains in an uptrend beyond 95 on the back of costly oil and foreign portfolio outflows, and we could see 96.00, with 95.00 now acting as support," Banerjee said. He added that strong foreign exchange reserves, the Reserve Bank of India's market presence and domestic growth remain supportive, although crude above $100 is likely to remain the dominant pressure in the near term.

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