Oil prices edged higher on Tuesday after Houthi attacks on Saudi Arabia and the shutdown of the kingdom's East-West Pipeline deepened fears over its export capacity. Analysts warn the outage threatens up to 4% of global oil supply, with repair estimates ranging from near-term fixes to as long as eight weeks.
Brent crude futures hit a session high of $108.43 a barrel before easing to $105.74, up 6 cents, on Tuesday. West Texas Intermediate futures gained 27 cents to $101.66 a barrel, having climbed as high as $104.21 earlier in the session.
Houthi attacks widen the conflict
Iran-backed Houthi forces in Yemen launched a fresh wave of attacks on Saudi Arabia on Monday, while Gulf Arab states postponed planned talks with Iran. The Houthis 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.
The attacks followed Friday's strikes, which Riyadh blamed on Iranian-backed fighters in Iraq, and which disrupted the East-West Pipeline — the route that lets Saudi crude oil bypass the blockaded Strait of Hormuz, through which about a fifth of global oil supplies passed before the U.S.-Iran war.
Export capacity under threat
Saudi Arabia could exhaust the crude available for export within days unless the pipeline resumes operations, buyers and traders say, with the strike threatening up to 4% of global oil supply. The Associated Press reported, citing two regional officials, that the 1,200-kilometer pipeline will be offline for three to five weeks while crews repair a damaged pumping station.
Goldman Sachs said in a note that the remaining 2 million barrels a day of recent Yanbu exports could also be at risk, with repair estimates ranging from near-term fixes to as long as eight weeks. The bank added that the escalation raised the probability of Brent rising above $120 a barrel in a scenario where average Gulf oil output in 2027 stays 4 million barrels a day below pre-war levels.
Prices eased from their earlier highs after Egyptian President Abdel Fattah al-Sisi and Saudi Crown Prince Mohammed bin Salman stressed the need to secure navigation in the Bab el-Mandeb Strait and the Red Sea during talks. Commodity vessel traffic through the Strait of Hormuz fell to four on Monday, down from 10 a day earlier, according to preliminary data from Kpler.
Pipeline could stay shut for weeks
The kingdom's squeeze on crude oil exports could deepen further. Rystad Energy estimates Yanbu crude and condensate loadings averaged 2.6 million barrels a day over the past week, and Rabobank energy strategist Florence Schmit said, according to MarketWatch, that energy prices "are only going to rise on the back of this."
Half of Russia's six top diesel-producing refineries were forced to significantly cut back or halt output in September because of drone-attack damage, according to Reuters calculations based on fuel market data, adding further pressure to refined-product markets already squeezed by outages across the Middle East.
Sources: Reuters, MarketWatch, Investing.com
Trading involves risk.
Risk Disclaimer
