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

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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.

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Oil & Energy

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