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Market Chatter: China's Yuan-Denominated Crude Futures Hit Record High

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China's yuan-denominated crude futures hit record highs as a shutdown of a key oil pipeline in Saudi Arabia tightened supply and refiners in the country bought additional cargoes, Bloomberg reported Tuesday.

Prices climbed to 929.4 yuan ($138.4) per barrel on the Shanghai International Energy Exchange, the highest in records dating back to 2018 when the contract was first listed, the report said.

The Chinese benchmark generally follows similar-quality crude benchmarks, with both Oman and Murban futures last trading above $126 a barrel. The Shanghai oil contract is backed by a range of medium-sour crude grades delivered to local storage, so its price also reflects freight costs, which have risen sharply, the report said.

Global oil benchmarks priced in US dollars, including Brent, have risen to multi-month highs amid disruptions to Saudi pipeline flows, growing instability in the Middle East and no signs of de-escalation of the Iran conflict. Increased buying by Chinese processors has also supported prices, it added.

The Shanghai International Energy Exchange did not immediately respond to' request for comment.

(Market Chatter news is derived from conversations with market professionals globally. This information is believed to be from reliable sources but may include rumor and speculation. Accuracy is not guaranteed.)

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Oil & Energy

US Oil Update: Futures Rise on Saudi Pipeline Attack, Vessel Strikes

Crude futures settled higher in after-hours trading on Monday as strikes on Saudi Arabia's East-West pipeline and attacks on vessels in the Strait of Hormuz heightened fears of severe, long-term global supply disruptions.Front-month West Texas Intermediate futures gained 1.8% to $101.89 per barrel, while Brent futures were up 1.7% to $106.39/bbl.Saudi Arabia has shut down the 7 million barrels per day pipeline, ING strategists said, adding that it's unclear how severe any potential damage is or how long it will be out of action.On Friday, Saudi Arabia shut its East-West oil pipeline as a precaution after it came under multiple attacks in the Riyadh and Medina regions.The pipeline has served as a critical alternative to the Strait of Hormuz, and Gelber & Associates analysts said its closure threatens exports from Yanbu if repairs extend beyond the port's limited inventory buffer."The relatively contained price reaction suggests the market still expects Saudi inventories to cushion exports in the near term, but if the disruption extends beyond the five-to-seven-day inventory cushion, that could change quickly," said Janiv Shah, vice president, commodity markets - Oil at Rystad Energy.On the supply front, President Trump said on Monday that crude was flowing through the Hormuz and that countries benefiting from the strategic waterway's security should reimburse the US for the costs of protecting it.The latest data from Windward showed that 17 vessels crossed the strait as of Sunday, comprising 10 inbound transits along the southern US-assisted lane and seven on the northern Iranian-controlled lane.Iran's Islamic Revolutionary Guard Corps said on Monday said that supertanker "Algaya" exploded after striking naval mines as the vessel tried to transit the Hormuz through a restricted zone south of the strategic waterway.The US President also claimed that Iran wants to reach a deal with the US, while making clear that he would decide whether Washington would negotiate."The failing Nation of Iran wants to make a deal, quickly and badly," Trump said in a social media post on Truth Social. "I will determine whether or not the US will choose to engage..."Meanwhile, a meeting between Iran and the six-member bloc of Gulf countries to discuss the situation in Hormuz, originally scheduled to take place Monday in Oman, has been postponed after the attack on the pipeline.Esmaeil Baqaei, spokesperson of Iran's Ministry of Foreign Affairs, said in televised remarks on Monday that Saudi Arabia's request to postpone the regional summit and attribute it to developments in Yemen is "a diversion from the root causes of this crisis."ING strategist said that the delay in the meeting between Iran and Gulf states pushes any prospect of de-escalation even further out of reach.

Oil & Energy

Crude Tanker Rates Hit New Highs as Hormuz Attacks Raise Shipping Risks, Kpler Says

Crude tanker rates hit new highs as escalating attacks in the Persian Gulf and Strait of Hormuz push shipping risks higher, Kpler said Monday.About 24 successful strikes have emerged over the past two weeks, with eight attributed to the US and the rest to Iran, sharply raising risks for crude shipping.Despite the attacks, US Navy convoys continue moving Gulf barrels, while owners and charterers remain willing to load under escort as higher risks translate into steeper freight costs.Very Large Crude Carrier freight from the Middle East Gulf to China reached $24 per barrel, while Gulf of Oman cargoes climbed to $12/bbl.Freight now accounts for 25% of crude value on Middle East Gulf shipments, up from 17% when the conflict began and about 5% before the war, Kpler said.For Gulf of Oman cargoes, freight represents 11% of crude value, showing how shipping costs increasingly determine the delivered price Asian refiners pay.Tanker rates outside the Middle East also reached their highest levels of the year as owners position ships for Gulf employment, leaving Atlantic Basin buyers competing harder for vessels.That competition is spreading the Hormuz risk premium across global tanker routes, even where ships have no direct exposure to the Strait, Kpler said.Kpler expects tanker rates to stabilize in the coming days, as another major increase in geopolitical risk would likely push the market toward fewer Gulf loadings instead of higher freight.Continued attacks could therefore reduce crude availability and Gulf tanker demand rather than trigger another proportional freight surge, creating a ceiling for rates despite elevated shipping risks.Higher freight costs are also pressuring Asian refiners, which need stronger refined-product margins to offset rising crude delivery expenses from the Middle East Gulf and Gulf of Oman.Refiners unable to pass those added costs to fuel buyers could face weaker economics, extending the tanker market squeeze across the broader oil complex, Kpler said.

Oil & Energy

Saudi Oil Exports Could Fall Up to 4 Million B/d if Pipeline Outage Persists, Kpler Says

A prolonged outage on Saudi Arabia's East-West pipeline could ultimately reduce Saudi crude exports by roughly 3.5 million to 4 million barrels per day, depending on the extent and duration of the disruption, Kpler analyst Amena Bakr said in a Monday note.A suspected Iraq-based drone attack on the pipeline has exposed a growing vulnerability in the region's oil infrastructure, bringing the conflict closer to facilities critical to global crude supplies, Bakr said.Industry sources told Kpler that the Sept. 10 attack struck the pipeline at multiple locations and caused significant damage to at least one pumping station. Saudi Arabia's Energy Ministry later confirmed it had shut down the pipeline as a precaution.The 1,200-kilometer Petroline carries crude from Saudi Arabia's eastern producing regions to Yanbu on the Red Sea. With a nameplate capacity of about 7 million b/d, it provides Saudi Arabia with its principal alternative to exports through the Strait of Hormuz.Saudi Aramco has continued meeting customer commitments without declaring force majeure, drawing on inventories held around the world. However, the Red Sea buffer is shrinking.Kpler estimates Yanbu crude inventories at less than 15 million barrels, down from almost 21 million in July and close to their lowest level since 2018.Satellite imagery confirmed two very large crude carriers loading at Saudi Arabia's west coast terminals on Sept. 10, with five additional tankers reportedly expected to load.However, Bakr noted that visibility is becoming increasingly difficult as vessels increasingly switch off their AIS transponders while loading at Saudi west coast terminals, a practice that is also becoming more common in the Middle East Gulf.The attack has also raised the risk of a wider confrontation. Saudi Arabia said the drones originated from Iraq, while stressing that this did not mean the Iraqi government was responsible.Riyadh said it would not retaliate "at this stage," giving Baghdad time to prevent further attacks, but reserved the right to respond.The alternative routes for escalation carry their own risks. Further action against Iran-aligned militias could draw the US deeper into Iraq, while escalation against Yemen's Houthis could threaten Red Sea shipping. Direct strikes on Iran could put the Strait of Hormuz at greater risk.The broader concern is that attacks are moving closer to oil-producing infrastructure. Damage to major processing facilities or producing fields would represent a far greater threat to global supply."The global oil market cannot absorb that progression indefinitely. Either escalation produces an off-ramp, or it produces a larger supply shock that finally forces one," Bakr said.