Oil prices rose nearly 5% Tuesday as concerns over supply disruptions lingered after attacks on Saudi Arabian energy infrastructure left the kingdom’s East-West pipeline offline and cast doubt on efforts to ease shipping risks in the Gulf.
- XOM stock is trending as oil shoots higher. See the real-time price action here.
Brent crude futures rose 1.77%, to $107.55 a barrel, while U.S. West Texas Intermediate futures gained 4.69%, to $106.14, according to Trading Economics.
The American Automobile Association reported the average price of a gallon of diesel in the U.S. hit a new record of $6.27, with the average price in California reaching $8.21 a gallon on Tuesday.
Attacks Escalate in the Gulf
Iran-backed Houthi forces in Yemen launched fresh attacks on Saudi Arabia Monday, while Gulf Arab states postponed planned discussions with Iran, fueling concerns the Middle East conflict could widen and further disrupt global oil supplies.
Reuters reported that Houthis carried out a missile and drone attack on the Khamis Mushait military airbase in southern Saudi Arabia, hitting aircraft hangars, radar systems, runways and ammunition depots in retaliation for Saudi strikes in Yemen.
Friday’s attacks, which Riyadh blamed on Iranian-backed fighters in Iraq, closed the East-West pipeline — the route allowing oil exports to bypass the blockaded Strait of Hormuz.
“Oil traders are treating every fresh attack or infrastructure hit as an incremental supply risk, while staying highly sensitive to any sign that the East-West pipeline or Hormuz flows could normalize,” said Tim Waterer, chief market analyst at KCM Trade, Reuters reported.
Vessel traffic through the Strait of Hormuz dropped to four ships Monday, down from 10 a day earlier, preliminary Kpler data showed, raising concerns about a route that carried about a fifth of global oil supplies before the U.S.-Israeli war on Iran began.
Saudi Arabia could exhaust oil available for export within days unless it restores the pipeline, potentially removing as much as 4% of global supplies from the market, according to Saudi buyers and traders cited by Reuters.
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Trading The Disruption
With crude holding a bid, oil majors Exxon Mobil Corp. (NYSE:XOM), Chevron Corp. (NYSE:CVX) and ConocoPhillips (NYSE:COP) tend to track higher benchmark prices.
Broader sector exposure runs through the Energy Select Sector SPDR Fund (NYSE:XLE).
Traders seeking direct crude exposure often lean on the United States Oil Fund LP (NYSE:USO) or Brent-tracking products, though contango and roll costs can erode returns during a prolonged rally.
Refiners face a tougher setup, since higher feedstock costs can compress margins even as retail prices climb.
Risk cuts both ways. “Plenty of uncertainty remains over the extent of damage and duration of the outage for the East-West pipeline in Saudi Arabia. Prices are likely to remain well supported until we get clarity,” ING analysts said, per Reuters.
Any confirmation that flows have resumed could quickly unwind gains.
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