Brent Hits $108 as Saudi Pipeline Shutdown Deepens Supply Fears

Brent crude oil prices reached $108 per barrel on Tuesday, following a series of escalating attacks in the Middle East. This marks a significant increase from the previous trading day's figure. West Texas Intermediate (WTI), another key crude benchmark, was trading at $102.66 per barrel. The surge in prices comes after a drone attack on Saudi Arabia's East-West pipeline, which has the potential to cut another 4% of the global oil supply.

Sources familiar with the situation told Reuters that the port of Yanbu, located on the Red Sea, currently holds enough oil for just five to seven days of exports. Additionally, the Yemeni Houthi forces are expanding their control over the Red Sea waterway, further exacerbating supply concerns.

ING commodity strategists, citing the potential damage to the East-West pipeline, which can transport 7 million barrels of crude daily, expressed uncertainty about the severity and duration of the disruption. However, they remain cautiously optimistic, maintaining their base case for Brent crude at $80 per barrel for the final quarter of the year. Meanwhile, Warren Patterson and Ewa Manthey, analysts at ING, noted that while oil volumes are still flowing through the Strait of Hormuz, the situation remains fluid.

On a different note, President Trump expressed a willingness to remain in Iran and maintain oil production, should the U.S. choose to do so, similar to Venezuela's approach. He also suggested that once the conflict with Iran ends, gasoline prices would drop significantly. However, the prospects for peace in the region appear dim, with the cancellation of a meeting hosted by Oman, originally scheduled for today.

The latest update in the story is the White House considering the deployment of the Defense Production Act to aid U.S. refineries, which are reportedly operating at maximum capacity.