Oil Prices Surge Over 1% Following Saudi Refinery Attack; Dollar Holds Gains

Oil prices climbed more than 1% on Wednesday, driven by renewed concerns over Middle East supply security after Yemen's Houthi group claimed responsibility for a ballistic missile attack on Saudi Arabia's Ras Tanura refinery. Brent crude futures rose $1.59, or 1.4%, to $115.47 a barrel, while U.S. West Texas Intermediate crude gained $1.43, or 1.4%, to $101.33 a barrel. The Houthis announced on Tuesday they had targeted the Ras Tanura refinery, Saudi Arabia's largest with a production capacity of 550,000 barrels per day, in an escalation of attacks on the kingdom, the world's second-largest crude oil producer. Saudi authorities have not yet confirmed the attack on the facility. The price increase followed a nearly $2 drop in the previous session, which was attributed to signs that Middle East talks had eased supply concerns. Commodity analysts at ING noted that the market anticipates potential escalations, suggesting oil prices will remain elevated as investors await further U.S. actions toward Iran. They added that the absence of new strikes on Iran after the election period could reduce the risk premium supporting prices.

In the United States, data from the American Petroleum Institute indicated a drawdown of 2.03 million barrels in crude oil inventories for the week ending October 23, contrary to analyst expectations of a slight increase. Official data from the U.S. Energy Information Administration is anticipated. In related news, three sources familiar with the matter suggested that the OPEC+ alliance is likely to maintain its December oil production targets unchanged at its upcoming Sunday meeting, aligning with market expectations, despite most of the group's major members producing below their quotas. Traders also anticipate a decline in Russian crude oil exports from Baltic and Black Sea ports next month, as domestic refineries increase diesel production following an agreement with Washington.

In currency markets, the U.S. dollar maintained its gains on Wednesday, having reached a two-week high, as markets await monetary policy decisions from several central banks, notably the U.S. Federal Reserve. The euro held steady at $1.1124, while the British pound dipped 0.1% to $1.32945. The dollar fluctuated against the Japanese yen before settling at 157.945 yen. Conversely, the New Zealand dollar fell as much as 1.7% to $0.55831 after the Reserve Bank of New Zealand kept interest rates at 2.75%, defying economists' expectations of a hike. Analysts suggested this might be a postponement rather than a reversal of tightening policy, with Reserve Bank Governor Anna Briman indicating potential further rate increases in future meetings. The Australian dollar rose 0.1% to $0.70345 following data showing inflation accelerated to 1.3% in the third quarter. Markets are now looking ahead to next week's Reserve Bank of Australia meeting, with expectations of discussions on the need for further interest rate hikes. The dollar index, measuring its performance against a basket of six major currencies, stabilized at 102.40 points, near its highest level since October 14. The yield on 10-year U.S. Treasury bonds increased by 2.2 basis points to 5.0112%.

In Canada, the U.S. dollar rose 0.1% to 1.4063 Canadian dollars ahead of the Bank of Canada's interest rate decision, amid concerns about inflationary pressures from high energy prices spreading to other economic sectors. The Israeli shekel depreciated by 1% amid renewed political uncertainty following exit polls indicating indecisive election results. In cryptocurrency markets, Bitcoin rose 0.4% to $81,062.47, and Ethereum increased by 0.8% to $2,360.81.