Crude oil jumped on Tuesday after Libya halted output at three oilfields and Saudi Arabia suspended loadings at its Red Sea port of Yanbu, deepening a supply crunch already caused by Houthi attacks on a key pipeline. WTI crude surged 4.4% to $105.88 a barrel and Brent gained 2.8% to $108.68, with both contracts up more than 8% for the week.
Crude prices marched higher on Tuesday as supply disruption fears deepened after reports that oil loadings at a critical Saudi Arabian Red Sea port had been suspended and that Libya had halted operations at three oilfields. WTI crude futures surged 4.4% to $105.88 a barrel. Brent crude climbed 2.8% to $108.68. Both contracts have jumped 10.6% and 8.8%, respectively, this week.
Libya halts oilfields, Saudi pipeline stays shut
Members of the security force protecting Libya's crude oil sector closed a valve on the Hamada-Zawiya pipeline, and the National Oil Corporation said operations had been completely halted at three oilfields, adding it could declare force majeure, according to Reuters. Libya was the seventh-largest crude oil producer in OPEC in 2023, the U.S. Energy Information Administration said.
Meanwhile, a Saudi pipeline damaged by Houthi attacks last Friday remained shut. The 1,200-kilometer East-West Pipeline, which can carry up to seven million barrels of oil daily, may take weeks to restart. Reuters reported up to 4% of global oil supply could be lost if the line fails to restart within days, citing Saudi oil buyers and traders. Shipping tracker Kpler said its base case has the pipeline returning at only around 50% of its pre-attack throughput after repairs of up to six weeks. That could cut Yanbu exports by 2.5 to 2.7 million barrels a day. Reuters also said oil loadings at Yanbu had been suspended, citing shipping sources. According to ING analysts: "Oil prices remain firmly supported", with that floor unlikely to give way until markets get clearer visibility on Saudi supply.
Hormuz diplomacy stalls, deepening the geopolitical risk
President Trump said Monday that Iran wanted to make a deal and that Washington was open to the idea, but Iranian officials rebuffed the notion. A meeting between Gulf powers and Iran meant to secure a deal on shipping through the Strait of Hormuz, set for Monday, was postponed, with Tehran saying the delay came at Saudi Arabia's request. Before the war between the U.S. and Iran began in late February, the Strait of Hormuz supplied about a fifth of the world's oil; flows have since slowed to a fraction of that level.
Oil becomes markets' biggest swing factor
The rally is rippling beyond energy markets. Since the U.S.-Iran war began in late February, rising oil prices have coincided with falling stocks and long-duration Treasury bonds, as higher crude has pushed bond yields up. WTI also rose for the 11th time in the past 12 trading days, according to investingLive. Traders now price a 92% chance the Federal Reserve raises rates at Wednesday's meeting.
Sources: Investing.com, MarketWatch (snippet-based), investingLive
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