Oil prices rose more than 2% on Tuesday, with Brent crude topping $108 a barrel, after attacks on Saudi Arabia’s energy infrastructure halted the East-West pipeline, heightening concerns over supplies and the time needed to repair damaged energy facilities and transport routes.
Brent futures rose $2.5, or 2.37%, to $108.18 a barrel by 08:13 GMT. US West Texas Intermediate futures gained $2.46, or 2.43%, to $103.85 a barrel.
East-West pipeline halt puts pressure on supplies
Concerns over oil supplies grew after military operations carried out by the Yemeni armed forces on Monday, as Arab Gulf states postponed talks that had been scheduled with Iran. The Yemeni armed forces said they had launched dozens of missiles and drones at the Khamis Mushait military air base in southern Saudi Arabia, targeting aircraft hangars, radar systems, runways and ammunition depots, in response to what they described as continuing Saudi aggression against Yemen.
Hamad Hussein, an economist covering climate and commodities at Capital Economics, said: “The new attacks on Saudi Arabia could affect oil-market investors’ expectations about the intensity and duration of the conflict.”
Saudi buyers and traders said oil available for export from Saudi Arabia could begin to run out within days unless the East-West pipeline resumes operations, potentially removing up to 4% of global oil supplies from the market.
Repair estimates and price risks
Goldman Sachs said in a note that the latest attack could be more serious and threaten the remaining Yanbu exports of about 2 million barrels per day. It added that the latest estimates for the repair period range from very soon to as long as eight weeks.
The bank said the attacks on oil infrastructure represented a major escalation of the conflict and increased the likelihood that Brent crude would exceed $120 a barrel. The estimate was based on a scenario in which average oil production from the Gulf region in 2027 remains 4 million barrels per day below prewar levels.
Shipping through the Strait of Hormuz
Preliminary data from Kpler showed on Tuesday that the number of cargo vessels passing through the Strait of Hormuz fell to four on Monday, compared with 10 the previous day. The decline raised concerns about shipping along a route through which about one-fifth of global oil supplies passed before US and Israeli military operations against Iran began on February 28.
