Brent crude hit $108 per barrel earlier today, following the latest escalation in the Middle East, before retreating to $107.22 per barrel at the time of writing. West Texas Intermediate was trading at $102.66 per barrel.
The surge follows the news of a drone attack on Saudi Arabia’s East-West pipeline that could cut off another 4% of global oil supply and signs that efforts at diplomacy are failing. According to unnamed sources quoted by Reuters, Saudi Arabia’s Yanbu port on the Red Sea has only enough oil for five to seven days of exports—and the Yemeni Houthis are expanding their control of the waterway.
“It’s unclear how severe any potential damage is, or how long it will be out of action,” ING commodity strategists wrote in a note earlier today, referring to the East-West pipeline, which has a capacity to carry 7 million barrels of crude daily.
The ING team remains relatively optimistic, however, maintaining its base case of $80 per barrel of Brent crude for the final quarter of the year. “The situation is fluid as we continue to see sizeable volumes of oil still moving through the Strait of Hormuz,” Warren Patterson and Ewa Manthey wrote.
Meanwhile, President Trump said on Sunday that the United States could stay in Iran and “keep the oil”. “We’ll ultimately get out (of Iran), unless we decide to stay and keep the oil like Venezuela,” the U.S. Commander in Chief said, as quoted by Reuters, noting that the money that the U.S. has made so far from selling Venezuelan oil had “paid for the war many times.” Trump also said gasoline prices would “drop like a rock” once the war with Iran ended. The prospects of peace, however, remain elusive, with the latest news there being the cancellation of a meeting to be hosted by Oman, which was supposed to take place today.
By Irina Slav for Oilprice.com
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