U.S. West Texas Intermediate futures traded 2.3% higher to $102.38 per barrel by 12:10 p.m. ET. Brent crude, the international benchmark, was last up 2.2% to $106.89 per barrel after hitting a session high of $109.80. Prices gained about 9% last week as fighting escalated between the U.S. and Iran.
Drones launched from Iraq damaged the East-West pipeline on Thursday, forcing the Saudi government to close the key crude oil artery. Riyadh has not disclosed how badly the pipeline is damaged or how long it will remain shut.
“The relatively contained price reaction suggests the market still expects Saudi inventories to cushion exports in the near term, but if the disruption extends beyond the five-to-seven-day inventory cushion, that could change quickly,” said Janiv Shah, an oil market analyst at Rystad Energy, in a Monday note.
A pump station appears to have taken serious damage, said Andy Lipow, president of Lipow Oil Associates. Riyadh may be able to bypass the pump and restart the pipeline with lower output, Lipow said. This is why prices have not surged even higher, he said.
“The longer the shutdown, the higher the price. Judging from the on-line pictures, it will take months to repair,” Lipow said in a note Monday.
Hormuz meeting postponed
A diplomatic meeting between Iran and the Gulf Arab states to discuss the situation in Hormuz, originally scheduled to take place Monday in Oman, was abruptly postponed after the pipeline attack.
Source: www.cnbc.com
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