Oil prices rose more than 1% on Tuesday after attacks on Saudi Arabian energy infrastructure left the kingdom’s East-West pipeline offline, raising fears that damage to energy infrastructure and transport routes could take longer to repair.
Brent crude futures rose $1.67, or 1.58%, to $107.35 a barrel at 1002 GMT, while U.S. West Texas Intermediate futures were up $2.14, or 2.11%, at $103.53 a barrel.
Concerns over oil supplies intensified after Iran-backed
Houthi forces in Yemen launched fresh attacks on Saudi Arabia on
Monday, while Gulf Arab states postponed planned discussions
with Iran.
“Fresh attacks by the Houthis targeting Saudi Arabia may be
influencing oil market investors’ expectations about the
severity and duration of the conflict,” said Hamad Hussain,
senior climate and commodities economist at Capital Economics.
The Houthis on Monday said they fired dozens of missiles and
drones at a military air base in Khamis Mushait in southern
Saudi Arabia, targeting aircraft hangars, radar systems, runways
and ammunition depots in retaliation for Saudi airstrikes in
Yemen.
This followed attacks on Friday on Saudi Arabia, which
Riyadh blamed on Iranian-backed fighters in Iraq, that disrupted
the country’s East-West pipeline, which allows oil exports to
bypass the blockaded Strait of Hormuz, through which about a
fifth of global oil supplies previously passed.
Saudi Arabia could exhaust crude available for export within
days unless the East-West pipeline resumes operations, according
to buyers and traders. The pipeline strike threatened up to 4%
of global oil supply.
“The recent attack may be more severe and could threaten the
remaining 2mb/d of recent Yanbu exports, with the latest repair
assessments ranging from ‘very soon’ to eight weeks,” Goldman
Sachs said in a note.
The attacks on oil infrastructure marked a meaningful
escalation of the conflict and increased the probability of
Brent rising above $120 a barrel, Goldman Sachs said, citing a
scenario in which average Gulf oil output in 2027 remains 4
million barrels per day below pre-war levels.
Commodity vessel traffic through the Strait of Hormuz
dropped to four on Monday, down from 10 a day earlier,
preliminary data from Kpler showed on Tuesday, raising concerns
about a route that carried about a fifth of global oil supplies
before the U.S.-Israeli war on Iran kicked off on February 28.
Oman’s Maritime Security Centre said on Tuesday that the
Panama-flagged oil tanker ‘El Gaia’ was being towed to an Omani
port after a fire broke out in its engine room following an
attack.
“In the absence of an adjustment in demand or greater oil
flows through the Strait of Hormuz, several weeks of the
East-West pipeline being closed could lift Brent crude prices
towards $130 per barrel,” Hussain said.
Separately, half of Russia’s six top diesel-producing
refineries were forced to significantly cut back or completely
halt output in September due to damage sustained in drone
attacks, according to Reuters calculations based on data from
fuel market participants.
Source: Khaleej Times