Brent hits four-month high near $108 on Middle East war risk; RBC sees $120 possible
Crude is at a four-month high. Brent was trading around $107.86 and WTI $102.28, both up about 13% from last week, the sharpest weekly gain since spring. For anyone buying diesel or gasoline downstream, that feed cost just jumped, and it works its way to the rack within days.
The Red Sea
Helima Croft at RBC Capital Markets told Reuters that Brent could top $120 a barrel by the end of the year if the fighting keeps up. The trigger is the Houthis taking Mokha, a Red Sea port that puts them in range for more direct strikes on Saudi energy infrastructure. Croft said maritime traffic through the Bab el-Mandeb is "gravely imperiled." Hormuz traffic has dropped too.
For a US buyer this is not a physical shortage yet, but the risk premium is real money. Every dollar on Brent feeds into the pump before the refiner takes a margin. Thirteen percent in a week is not noise, and it shows up in your cost of goods whether or not a single cargo is actually stopped.
Record US output
EIA's latest Short-Term Energy Outlook forecasts US crude production averaging 13.8 million barrels a day in 2026, past the 13.7 million record set this year. Domestic supply is the counterweight. If the strait stays open, more barrels at home could take some heat out of the front of the curve. That does not offset a Gulf disruption on its own, and it does nothing for the war premium while the shooting continues.
Refinery strikes
Ukraine says it hit a Russian refinery in Saratov, and drones also struck a logistics center in the same city. Russia's refining base has been a repeat target this year. Each hit takes product offline and tightens the global diesel balance, which US distillate prices feel even when those barrels never touch this coast. Track it as a slow drain on product supply, separate from the crude move.
What to watch
Whether Bab el-Mandeb and Hormuz traffic keeps falling. If it does, Croft's $120 case gets more airtime and rack prices follow crude higher. Watch next week's EIA inventory report for distillate draws, since that is where a jobber sees the squeeze first. Watch whether the Russian refinery hits start showing up in export data. Crude could ease if the strait reopens and OPEC holds output steady, but nothing on the board right now says that happens soon.