Oil prices rose more than 1% on Tuesday as attacks on Saudi Arabia’s energy infrastructure left its East-West pipeline offline, increasing concerns that damage to production and transport facilities could take weeks to repair.
Brent crude futures climbed $1.67, or 1.58%, to $107.35 a barrel in morning trading. US West Texas Intermediate futures rose $2.14, or 2.11%, to $103.53 a barrel.
The latest gains followed fresh attacks by Iran-backed Houthi forces in Yemen and the postponement of planned discussions between Gulf Arab states and Iran. Investors are increasingly concerned that the conflict could disrupt energy supplies for an extended period.
“Fresh attacks by the Houthis targeting Saudi Arabia may be influencing oil market investors’ expectations about the severity and duration of the conflict,” said Hamad Hussain, senior climate and commodities economist at Capital Economics.
The Houthis said on Monday that they had launched dozens of missiles and drones at a military air base in Khamis Mushait in southern Saudi Arabia. The group said the attack targeted aircraft hangars, radar systems, runways and ammunition depots in response to Saudi airstrikes in Yemen.
The development came after attacks on Friday that disrupted Saudi Arabia’s East-West pipeline. Riyadh blamed those strikes on Iranian-backed fighters in Iraq.
The pipeline is a key alternative route for Saudi oil exports because it allows crude to bypass the Strait of Hormuz, a major shipping route that carried about one-fifth of global oil supplies before the current conflict began.
Buyers and traders said Saudi Arabia could run short of crude available for export within days if the pipeline remains closed. The attack threatened up to 4% of global oil supply, adding to concerns about tighter markets.
Goldman Sachs said the attacks represented a significant escalation and increased the possibility of Brent crude rising above $120 a barrel. Its assessment was based on a scenario in which average Gulf oil production remains 4 million barrels per day below pre-war levels in 2027.
Traffic through the Strait of Hormuz has also fallen sharply. Preliminary Kpler data showed that only four commodity vessels passed through the strait on Monday, down from 10 the previous day.
Oman’s Maritime Security Centre said the Panama-flagged oil tanker El Gaia was being towed to an Omani port after an engine-room fire following an attack.
Hussain warned that if demand does not adjust or additional oil does not move through Hormuz, several weeks of disruption to the East-West pipeline could push Brent prices towards $130 a barrel.
Meanwhile, supply concerns are also growing in Russia. Reuters calculations based on fuel market data indicated that three of Russia’s six largest diesel-producing refineries significantly reduced or halted output in September after sustaining damage in drone attacks.
