Oil Prices Rise US$3 as Saudi Export Disruptions Deepen

Oil prices climbed sharply on Tuesday as disruptions to Saudi Arabia’s crude exports raised concerns that supply problems could persist for weeks.

Brent crude settled US$3.07, or 2.9 per cent, higher at US$108.75 a barrel, while US West Texas Intermediate crude rose US$4.44, or 4.38 per cent, to US$105.83. Both benchmarks closed at their highest levels since May 19.

The latest gains came after shipping industry sources reported that crude loadings at Saudi Arabia’s Red Sea export hub of Yanbu had been suspended. Riyadh had also cancelled some late-September crude shipments to European customers, adding to concerns over the country’s ability to maintain exports.

Yanbu has become increasingly important to global oil supplies after the closure of the Strait of Hormuz disrupted the traditional route used to transport a significant share of the world’s oil and liquefied natural gas.

Saudi Arabia has relied more heavily on its East-West pipeline, which carries crude roughly 1,200 kilometres from the country’s eastern oil fields to Yanbu on the Red Sea. The route allows Saudi crude to reach international markets without passing through the Strait of Hormuz.

The pipeline was damaged in attacks by Yemen’s Iran-aligned Houthi forces, forcing Saudi Arabia to suspend the key export route. Further attacks and the suspension of Yanbu loadings have intensified concerns among traders about how long the disruption could last.

The supply concerns have also increased demand for US crude. Analysts said European refiners could turn to US supplies if Saudi shipments remain disrupted, supporting WTI prices relative to Brent.

The disruption is not limited to Saudi Arabia. In Libya, operations at three oil fields were suspended after members of the Petroleum Facilities Guard shut a valve on a crude export pipeline. The country’s National Oil Corporation warned that further disruptions could lead to a force majeure declaration.

Meanwhile, attacks on energy infrastructure in Russia and Ukraine have added further pressure to global fuel markets. US diesel futures and diesel refining margins reached record closing levels amid concerns over reduced refinery output.

The duration of the Saudi disruption remains uncertain. Estimates for repairs to the East-West pipeline have ranged from several days to as long as eight weeks, while Saudi Arabia’s available crude for export could come under increasing pressure if the pipeline remains offline.

With disruptions affecting several major energy routes and facilities, traders are closely watching developments in Saudi Arabia and elsewhere for signs of whether the current supply shock will ease or extend into the coming weeks.