Oil prices climb over 4% to 16-week high after Saudi strikes and Red Sea attacks
Brent and U.S. crude futures rose more than 4% on Monday, reaching their highest levels since May, as new attacks on Saudi energy facilities and shipping routes heightened supply concerns.
Oil prices jumped more than 4% on Monday, pushing Brent futures to $109.29 a barrel and U.S. West Texas Intermediate to $104.26, their highest closes since mid-May. The rally followed a fresh missile and drone strike by Yemen's Iran-aligned Houthis on a Saudi airbase in Khamis Mushait and a recent attack that disabled Saudi Arabia's east-west pipeline, which diverts oil away from the Strait of Hormuz.
The pipeline outage could affect up to 4% of global oil supply, forcing the Red Sea port of Yanbu to rely on storage estimated to cover five to seven days of exports, according to industry sources. "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, an oil markets analyst at Rystad.
Ship transits through the Strait of Hormuz fell to single-digit numbers per day over the weekend, well below the ten-day average of 14, while the Houthis expanded control to the island of Perim, tightening their grip on the Bab el-Mandeb strait at the Red Sea's southern entrance.
U.S. diesel futures rose to about $5.18 per gallon, on track to exceed the record set in April 2022, and the heating-oil crack spread reached an all-time high of roughly $114 per barrel, according to LSEG data.
"Short of stopping both oil-price-affecting wars and curing the global refinery (capacity) problem, our fraternity is wondering where an inoculation against $120 Brent can be found," said PVM analyst John Evans.
"U.S. President Donald Trump called on Ukrainian President Volodymyr Zelenskiy to stop targeting Russian diesel infrastructure, saying the attacks were causing a shortage of the fuel that is 'hurting the world'," the report noted.
Ukraine says its attacks on Russian refineries aim to raise the cost of Moscow's war effort. Russia remains the world's third-largest crude producer behind the United States and Saudi Arabia and is a member of the OPEC+ group.