New fires are being set in the oil market by the escalation of Houthi attacks in Saudi Arabia, with Brent surging to 106 dollars per barrel, reaching levels not recorded since late May. At the same time, Riyadh finds itself confronting severe pressure on its exports, as the attacks also threaten the alternative transit route via the Red Sea, forcing Saudi Arabia to curb its output.
This development intensifies fears of a fresh shock to global oil supply, during a period in which the market is already under strain due to the broader conflict in the Middle East. Concurrently, OPEC is cutting its forecast for global demand growth in 2026 for the fifth consecutive month, creating a particularly paradoxical environment: weaker demand, yet ever greater apprehension over supply.
Saudi Arabia reduces production
Crude oil production of Saudi Arabia retreated in August to its lowest level since 1990, according to figures disclosed by the kingdom to OPEC and cited by Bloomberg on Thursday. The drop occurred as the reignition of hostilties between the United States and Iran sparked turbulence across the export corridors of the region.
Riyadh notified the secretariat of OPEC that its production declined by 1.9 million barrels per day, down to 6.238 million barrels per day.
This level marks an even deeper contraction compared to the previous low recorded in April, when output had tumbled to the lowest level reported by Saudi Arabia since the onset of the Gulf War.
Houthi rebels of Yemen declared in late July a «maritime embargo» on the ports of Saudi Arabia, discouraging vessel operators from the region and restricting the nation's capacity to export oil.
Faced with constrained oil storage capacity, Saudi Arabia was forced to reduce its extraction. Crude oil exports slumped to approximately 3.1 million barrels per day in August, down from 5.1 million barrels per day in July, according to Kpler, marking the lowest level since at least 2013.
The decision of the Houthis to engage in the Middle East conflict has struck the primary alternative available to Saudi Arabia for exporting oil without the necessity of transiting through the Strait of Hormuz.
Shortly after the eruption of the conflict in late February, state-owned Saudi Aramco began directing as much crude oil as possible via pipelines toward the port of Yanbu on the Red Sea, aiming to export from there. This helped the country partially restore its production, reaching roughly 80% of normal levels. As the premier producer in OPEC and the largest crude exporter worldwide, the output of Saudi Arabia exerts an outsized influence on global oil markets.
Analysts estimate that the curtailment of exports via the Red Sea will persist, as the Houthis intensified their assaults this week against oil installations of Saudi Arabia, striking multiple energy facilities during a wave of attacks on Tuesday.
Downgrade of forecasts by OPEC
Meanwhile, OPEC trimmed its projection for global oil demand growth in 2026 to 380,000 barrels per day, according to its monthly report published today.
This marks the fifth consecutive occasion that the oil group has downgraded its forecast.
OPEC maintains a more optimistic assessment regarding oil consumption relative to other forecasting bodies. The International Energy Agency (IEA) projects that oil demand will contract in 2026, citing the greater fallout that the war with Iran will exert on consumption patterns.
The report also showed that OPEC raised its projection for oil demand growth in 2027.
Brent exceeded 105 dollars
In the aftermath of these developments, oil prices skyrocketed.
Specifically, Brent futures stand at 105.8 dollars with gains of 4.54%, while American crude (WTI) stands at 100.6 dollars with an advance of 4.78%.
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