Brent crude climbed to $108.85 a barrel after Saudi Arabia's East-West pipeline stayed shut following a drone attack, with Riyadh still not saying how long repairs will take. A separate diplomatic meeting between Iran and Gulf Arab states on the Strait of Hormuz was abruptly postponed the same day.
Pipeline shutdown drags on
Brent crude, the international benchmark, traded 4.2% higher at $108.85 a barrel on Monday. U.S. WTI futures rose 4.2% to $104.23 over the same period. The move followed drones launched from Iraq that damaged the East-West pipeline on Thursday, forcing Saudi Arabia to shut the artery. Riyadh has not disclosed how badly the pipeline is damaged or how long it will stay closed.
The pipeline can carry 7 million barrels per day and has helped ease the crude oil supply disruption caused by the Iran war. Andy Lipow of Lipow Oil Associates said a pump station appears to have taken serious damage. According to CNBC, Lipow said: "The longer the shutdown, the higher the price." Crude loaded for export at the Red Sea port of Yanbu averaged 2.6 million barrels a day over the past week, the volume at risk if the pipeline stays shut and stored crude at the port runs out.
Gulf states postpone Hormuz talks
A diplomatic meeting between Iran and Gulf Arab states, originally set for Monday in Oman to discuss the situation in the Strait of Hormuz, was postponed after the pipeline attack. The security situation in the strait stayed tense, with another tanker coming under attack on Sunday, causing a severe fire onboard, according to the United Kingdom Maritime Trade Operations Center.
Houthis expand their reach
Saudi Arabia has also faced escalating attacks from Iran-allied groups. Houthi militants have reportedly seized the strategic Perim Island in the Bab el-Mandeb Strait after taking the port city of Mokha on Yemen's western coast, which would give the militants a stronger position to disrupt oil flows through the waterway. The Houthis declared a maritime embargo of Saudi Arabia in July.
The renewed supply fears also hit gas markets: the UK benchmark gas price rose 5% to 208.73p a therm, its highest level since December 2022, while investor concern over rising inflation added to selling pressure on bond markets.
Sources: CNBC, The Guardian
Trading involves risk.
Risk Disclaimer
