Saudi Cabinet strongly condemns continued Houthi attacks on civilians

Oil prices surged above $108 on Tuesday following a series of attacks on Saudi Arabian energy infrastructure, prompting fears that the disruption could extend longer than anticipated. Brent crude futures climbed $2.5, or 2.37%, to $108.18 a barrel, while US West Texas Intermediate futures increased $2.46, or 2.43%, to $103.85 a barrel.

Concerns over potential oil supply shortages rose after Iran-backed Houthi forces in Yemen intensified their strikes on Saudi Arabia on Monday, while Gulf Arab states delayed planned talks with Iran. Hamad Hussain, a senior climate and commodities economist at Capital Economics, noted that the fresh attacks by Houthis may be shaping investors' expectations about the conflict's intensity and duration.

The Houthis claimed responsibility for firing multiple missiles and drones at a military airbase in Khamis Mushait, targeting aircraft hangars, radar systems, runways, and ammunition depots in response to Saudi airstrikes in Yemen. This followed earlier attacks on Friday, also blamed on Iranian-backed fighters in Iraq, which disrupted Saudi Arabia's East-West pipeline.

This pipeline, crucial for oil exports that bypass the blockaded Strait of Hormuz, carries about a fifth of global oil supplies. Without its restoration, Saudi Arabia could run out of exportable crude within days, potentially exposing up to 4% of the global oil supply. The recent attack might be more severe, jeopardizing the remaining 2 million barrels per day of Yanbu exports, with repair estimates ranging from weeks to months.

Goldman Sachs warned that these attacks could push Brent crude above $120 per barrel, citing a scenario where Gulf oil output remains 4 million barrels per day below pre-war levels. Commodity vessel traffic through the Strait of Hormuz dwindled to four vessels on Monday, down from 10 the previous day, according to preliminary data from Kpler, raising concerns about the critical route that once handled a fifth of global oil supplies before the U.S.-Israeli war on Iran began on February 28.

Hussain suggested that if demand doesn't adjust or oil flows don't increase through the Strait of Hormuz, Brent crude prices could surge towards $130 per barrel. In China, official data revealed that oil throughput grew for the second consecutive month in August, driven by fuel exports following Beijing's easing of restrictions in mid-July.