Oil Prices Slip Over 2% as Geopolitical Tensions and Demand Concerns Weigh

U.S. crude oil prices dropped more than 2% on Monday, with West Texas Intermediate futures falling 2.19% to $101 a barrel and Brent crude futures down 1.89% to $114.51 a barrel. The decline followed a sharp rally on Friday after Yemen's Houthi militants attacked Saudi Arabian energy infrastructure, reviving concerns about possible supply disruptions.

The Houthis said they targeted Saudi Arabia's main airport in Riyadh and oil facilities on Saturday, and Saudi authorities reported intercepting additional missiles and drones on Sunday. Although the kingdom partially resumed operations at the airport, the group warned of further strikes.

Analysts noted that the heightened hostilities increase the perceived vulnerability of Saudi production, refining and export capacity. Michael Alfaro, chief investment officer at Gallo Partners, told CNBC that geopolitical uncertainty had already added roughly $20 per barrel to oil prices. He warned that if Brent prices rose above $120-$140 a barrel, demand could be significantly reduced, and that damage to refining capacity might create a longer-term structural challenge extending into 2027.

Separately, Saudi energy ministers announced plans to start storing crude oil in Singapore from the second half of 2027 to bolster the resilience of the Asian supply chain. In the United States, the Energy Department authorized the release of up to 400,000 barrels from the Strategic Petroleum Reserve to offset a supply disruption at a Louisiana refinery. However, U.S. producers remain cautious about expanding capital expenditures, with Alfaro noting that major new drilling rigs are not being added despite some modest rig activity.