Oil prices rose by nearly 2% on Tuesday due to ongoing concerns over supply disruptions caused by attacks on Saudi Arabia's energy infrastructure. These attacks have led to the shutdown of the East-West pipeline in Saudi Arabia and have cast doubt on efforts to mitigate transportation risks in the Gulf.
Increase in Brent and West Texas Intermediate Oil Prices
Brent crude futures rose by $1.87, or 1.77%, to $107.55 per barrel, while West Texas Intermediate crude futures increased by $1.88, or 1.85%, to $103.27 per barrel. Both types of oil had also experienced price increases of over 1% in the previous session.
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New Attacks and Concerns Over Further Disruptions
Iran-backed Houthi forces in Yemen launched new attacks on Saudi Arabia on Monday. These attacks included a missile and drone strike on the Khamis Mushait military base in southern Saudi Arabia, damaging various infrastructures. These attacks were in response to Saudi strikes in Yemen and have heightened concerns over escalating tensions in the Middle East and their impact on global oil supply.
Oil trade is viewed as an increasing risk due to the new attacks, while traders remain highly sensitive to any signs of normalization in oil flow through the East-West pipeline or the Strait of Hormuz. Additionally, the traffic of cargo ships through the Strait of Hormuz has decreased to four vessels on Monday, raising concerns about a critical route that transports nearly one-fifth of global oil supply.
Saudi Arabia may end oil supply for exports within a few days if the East-West pipeline does not resume operations, which could remove up to 4% of global supply from the market. This pipeline typically transports about 4 million barrels per day to the port of Yanbu on the Red Sea.
ING analysts stated in a note that "a significant amount of uncertainty remains regarding the severity of the damage and the duration of the East-West pipeline shutdown. Prices are likely to remain well supported until greater clarity is achieved."
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