Oil prices climbed on Tuesday as fresh attacks on Saudi Arabia and the continued shutdown of a major oil pipeline heightened concerns about disruptions to global energy supplies.
Brent crude futures rose $1.24, or 1.18%, to $106.93 a barrel at 0026 GMT, while U.S. West Texas Intermediate crude gained $1.29, or 1.24%, to $102.65 a barrel. Both benchmarks had also advanced in the previous session as traders assessed the growing risks to crude production and transportation across the Middle East.
The latest increase followed a fresh attack by Iran-backed Houthi forces in Yemen against Saudi Arabia on Monday. The group used missiles and drones to target a military airbase in Khamis Mushait, southern Saudi Arabia, according to Reuters.
The assault came after attacks on Saudi Arabia last week that Riyadh blamed on Iran-backed fighters in Iraq. Those strikes disrupted the country’s East-West pipeline, an important route that enables Saudi Arabia to transport crude to the Red Sea while avoiding the Strait of Hormuz.
Tim Waterer, chief market analyst at KCM Trade, said the developments were increasing pressure on oil markets.
“Oil traders are treating every fresh attack or infrastructure hit as incremental supply risk,” Waterer said, according to Reuters.
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The East-West pipeline remains offline, raising concerns about Saudi Arabia’s ability to move crude to international markets. The 1,200-kilometre pipeline can transport about four million barrels of oil a day to the Red Sea port of Yanbu, giving Saudi Arabia an alternative export route when shipping through the Strait of Hormuz faces disruption.
The pipeline’s outage is particularly significant because Saudi Arabia is one of the world’s largest oil exporters. A prolonged interruption could reduce the amount of crude available to international buyers at a time when markets are already facing uncertainty over supplies from the wider region.
Attention has also turned to the Strait of Hormuz, through which a substantial share of the world’s oil supply normally passes. Commodity vessel traffic through the waterway fell to fewer than 10 transits a day over the weekend, compared with a 10-day average of 14, Reuters reported.
The strait carried about one-fifth of global oil supplies before the U.S.-Israeli war on Iran began on February 28. Any sustained reduction in shipping through the waterway could therefore have consequences far beyond the Middle East, potentially affecting fuel costs and inflation in major economies.
Saudi Arabia could begin exhausting crude available for export within days if the East-West pipeline is not restored, according to Saudi buyers and traders cited by Reuters. The prospect has added urgency to efforts to assess the extent of the damage and determine how quickly repairs can be completed.
Waterer said the length of the disruption would be a major factor in determining the next direction of oil prices.
“The big question for traders right now is the duration of the East-West outage,” he said. “Any prolonged disruption and the associated supply loss could easily push prices to the next level higher.”
Meanwhile, Gulf Arab states postponed planned discussions with Iran, adding uncertainty to diplomatic efforts aimed at easing tensions and protecting shipping routes.
With the pipeline still out of service and attacks continuing, oil traders are closely monitoring developments across the region for signs of further damage to energy infrastructure or restrictions on crude shipments.
