Global oil markets have started the week on a firm footing, with crude prices continuing to climb above the $100-a-barrel mark as traders assess the implications of a drone attack on Saudi Arabia’s East-West pipeline and renewed uncertainty around energy flows from the Middle East.
Brent crude futures surged $3.21, or 3.1 per cent, to $107.82 per barrel by 1218 GMT, having hit a session high of $108.65 earlier. US WTI futures gained $2.77, or 2.8 per cent, to $102.82. In the evening, prices pared gains, with Brent futures still up $2.72, or 2.6 per cent, to $107.33 per barrel at 1539 GMT. US West Texas Intermediate (WTI) crude rose $2.51, or 2.5 per cent, to $102.56.
The latest rally follows Saudi Arabia’s decision to halt operations on the East-West pipeline, a major export route capable of transporting around 7 million barrels per day and a critical alternative to shipments through the Strait of Hormuz. The move came after drones damaged the pipeline, although the extent of the damage and the timeline for reopening remain unclear.
According to Vijay Valecha, Chief Investment Officer at Century Financial, the shutdown has heightened fears of tighter supplies at a time when geopolitical tensions are already disrupting trade routes across the region. “If the pipeline closure is prolonged, it could lead to output cuts by the Kingdom, suggesting a short-term bullish market structure,” he said.
Valecha noted that crude prices have posted gains of more than 9% for two consecutive weeks, underlining strong bullish momentum. However, he cautioned that technical indicators are approaching overbought territory, raising the possibility of short-term profit-taking even as prices trend higher.
The market’s latest advance reflects a growing belief that the conflict in the Middle East is no longer merely a geopolitical concern but an increasingly tangible supply issue. Nick Spencer-Skeen, Senior Executive Officer at Lunaro Markets Limited, said prices surged as attacks on tankers and energy infrastructure around the Strait of Hormuz began to affect the physical movement of oil. “Oil prices popped last week as the Middle East conflict increasingly translated into a physical supply problem,” he said.
He added that reduced vessel traffic through the crucial shipping corridor, combined with disruption to alternative export routes, has intensified concerns that Gulf oil supplies could remain constrained. Saudi Arabia’s temporary pipeline closure and the lack of immediate progress toward reopening Hormuz have further increased those risks.
“As we enter the new week, it leaves oil trading with a sizeable geopolitical premium,” Spencer-Skeen said, warning that while diplomatic progress could trigger a sharp reversal, Brent may remain supported above $100 if shipping security fails to improve. He also highlighted the potential inflationary impact of higher energy prices across broader financial markets.
Despite the bullish sentiment, some analysts believe the market retains sufficient buffers to absorb a temporary disruption. Norbert Rücker, Head of Economics & Next Generation Research at Julius Baer, said the pipeline outage has undoubtedly increased uncertainty but is unlikely to trigger a prolonged supply crisis on its own. “The attack on Saudi Arabia’s East-West pipeline and its subsequent closure rattles the oil market and keeps prices well supported for the time being,” he said.
Rücker noted that Saudi Arabia continues to export oil through Red Sea storage facilities, Hormuz shipments have largely continued despite heightened hostilities, and global inventories remain adequate to absorb short-term disruptions. While uncertainty over repairs and lost volumes could keep markets volatile in the coming weeks, analysts say the next direction for oil will depend on the duration of the outage and whether regional tensions ease or escalate further.
Source: Khaleej Times