Oil prices jumped Tuesday after Saudi Arabia reportedly cancelled some September crude cargoes following a drone strike that shut its East-West pipeline. West Texas Intermediate settled at $105.83 a barrel, its highest close since May, while Brent advanced to $108.75 as Libyan output disruptions and renewed Houthi strikes added to the pressure.
West Texas Intermediate gained 4.4% to $105.83 a barrel, its highest closing price since May 19. Brent crude advanced 2.9% to settle at $108.75, with prices up more than 20% this month as fighting escalates in the Persian Gulf.
Saudi Arabia cancels crude cargoes
Trade sources told Reuters that Saudi Arabia informed European customers some September crude deliveries are cancelled. Saudi officials have described the East-West pipeline closure as a precautionary measure after last week's drone attack from Iraq, but they have not given a damage assessment or a timeline.
The pipeline can carry 7 million barrels a day and had been rerouting exports to the Red Sea while the U.S. and Iran contest control of shipping lanes in the region. Energy Secretary Chris Wright told CNBC he expects the pipeline to restart operations in days: "This will be a brief and temporary interruption."
Escalation spreads beyond Saudi Arabia
Libya's national oil company suspended operations at two oilfields and a pumping station amid protests, Reuters reported. Houthi militants launched renewed drone and missile strikes on the Saudi cities of Khamis Mushait, Abha and Taif this week.
U.S. Central Command said it destroyed five Iranian oil tankers on Sept. 8 after Iran's Revolutionary Guard Corps twice targeted a U.S. Navy warship with ballistic missiles. That earlier escalation had already pushed Brent to $106.83 on Sept. 10, an 11.7% gain since Sept. 2.
Goldman Sachs senior commodity strategist Yulia Zhestkova Grigsby said the attacks on oil infrastructure mark a meaningful escalation of the conflict and increase the probability of Brent exceeding $120 in the bank's upside scenario.
Sources: US Top News and Analysis, The Defiant
Trading involves risk.
Risk Disclaimer
