Brent crude oil prices increased by as much as 3.7%, exceeding $108 per barrel, before retreating slightly. West Texas Intermediate oil was priced around $103. Late Friday, Saudi Arabia announced a precautionary suspension of the East-West pipeline following attacks the previous day. The timeline for the pipeline’s resumption remains unclear. “It all comes down to how long the closure will last,” said June Goh, a senior oil market analyst at Sparta Commodities SA, in an interview with Bloomberg. She noted that if the flow of oil is restored quickly, the impact on the market should be limited, as reserves stored in Yanbu at the western end of the pipeline could be utilized. However, a prolonged suspension could force Saudi Arabia to cut back its production, she added.
Additionally, amid the diplomatic front, a scheduled meeting on Monday between Iran and representatives of several Gulf states to discuss establishing a temporary shipping route through the Strait of Hormuz has been postponed, according to Omani Foreign Minister Badr Albusaidi. Bahrain had previously announced it would not participate in the talks, citing the attack on the East-West pipeline among its reasons. Axios reported that Saudi Arabia also had reservations about the plan. Investors are also analyzing the consequences of the rapid advance of Iranian-backed Houthi fighters along the Red Sea coast in Yemen. The group’s progress may allow it to gain greater control over shipping through the Bab al-Mandab strait, another critical point in global trade routes.
Oil prices have risen by more than three-quarters this year as the conflict between the U.S. and Iran has expanded throughout the region, limiting exports and creating chaos in maritime transport. An additional factor supporting the price increase is the recent rise in oil purchases by China, the world’s largest importer of the commodity. The crisis in the Middle East has triggered an inflationary shock in the global economy, pushing up prices of oil, natural gas, and petroleum products, including diesel. Following data from the U.S. showing an acceleration in price growth in August, the Federal Reserve is widely expected to raise interest rates this week.
