Brent crude, the main international oil benchmark, was up 2.8% on Monday (14), at $107.54 a barrel. For anyone filling a car tank, this is the kind of news that tends to reach the pump: costlier oil raises the price of gasoline, diesel and airfares over time, and adds to inflation. WTI, the benchmark for the US market, was up 2.9%, at $102.93.
The rally follows new attacks on Saudi energy facilities and on ships in the Gulf, according to Brazilian news site G1. Saudi authorities said the East-West pipeline, which crosses the kingdom and lets the country export oil without passing through the Strait of Hormuz, was shut temporarily after a drone strike. The halt threatens up to 4% of global supply, as much as one in every 25 barrels the world consumes.
With the pipeline down, the Red Sea port of Yanbu holds enough stock to keep exports going for only five to seven days, InfoMoney reported, citing three industry sources familiar with Saudi shipments. Beyond that window, exports are at risk. In practical terms, the market is watching a clock of about one week.
How it works: Brent and WTI are futures contracts, deals to buy or sell oil at a set future date, and they act as the market's reference prices. Brent guides much of the trading outside the United States; WTI is the gauge for American oil.
Attacks at sea and on land
A vessel in the Strait of Hormuz was hit by a projectile, sparking a fire and forcing the crew to abandon ship, the UK maritime security agency UKMTO reported on Sunday. Iran said one person died and four crew members were injured on an Iranian commercial ship struck off the country's coast. On land, Saudi state media released videos of damage to homes and a mosque in Jazan province, which it blamed on a Houthi attack.
The Houthis, an Iran-aligned group from Yemen, said they had also attacked a Saudi military base in a neighboring province. On Friday, they reached Perim island, moving to tighten control over the Bab el-Mandeb strait, another oil route that has carried 4% to 5% of global supply in recent months.
No peace talks in sight
"This follows an escalation of attacks on energy infrastructure in Saudi Arabia, including the crucial East-West pipeline," commodity strategists at bank ING said, in comments cited by InfoMoney. They noted it remains unclear how long the pipeline will stay offline.
Oil had already jumped 8% last week and crossed $100 for the first time since July. A meeting between Gulf countries and Iran to discuss the Strait of Hormuz had been set for Monday in Oman, but Omani foreign minister Badr Albusaidi said it was postponed. According to the reports, the war started six months ago, launched by the United States and Israel, and no peace talks have taken place since a provisional deal collapsed in June.