Oil Jumps as Attacks Halt Key Saudi Hormuz Strait Bypass


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil futures jumped Monday (9/14) morning after drone strikes 
on Friday forced shut Saudi Arabia's East-West pipeline, which transported 4 
million bpd of crude oil to export terminals at the Red Sea, bypassing Iran's 
blockade of the Strait of Hormuz.

   By 07:53am ET, ICE Brent for November delivery was up $3.86 to trade near 
$108.47 bbl, and NYMEX WTI for October delivery rose $3.49 to $103.54 bbl.

   Downstream, NYMEX ULSD for October delivery advanced $0.1071 to $5.0664 
gallon, and front-month RBOB futures soared $0.1355 to $3.4427 gallon.

   The US dollar index jumped 0.46 points to 99.57 against a basket of foreign 
currencies.

   Exports from Saudi Arabia's Red Sea port of Yanbu continued Monday as crude 
was being drawn from storage tanks. The port's maximum storage capacity of 35 
million bbl would allow exports to continue at the current pace for around nine 
days. Tanks, however, are unlikely to be filled to the brim, shortening this 
already terse time window.

   Riyadh has not yet commented on how long it expected the pipeline to be shut 
for repairs, calling the shutdown "temporary" and a "precautionary measure". 
Reports suggested the pipeline was struck at several points along its route, 
and satellite images published over the weekend revealed extensive damage to at 
least two pump stations.

   Simultaneously, Houthi rebels on Friday took control of vital areas in and 
along Bab el-Mandeb, the waterway connecting the Red Sea to the Indian Ocean. 
The Iran-allied Yemeni militia has since July, when it declared a blockade of 
Saudi oil exports, launched repeated attacks on Saudi tankers, forcing 
shipments from Yanbu to Asia on a long and expensive detour around Africa. 
Damages to the pipeline feeding the port are now jeopardizing even these flows, 
and full Houthi control over Bab el-Mandeb could keep buyers east of the Suez 
Canal choked off most of this vital supply source even in the event of a swift 
restart of the East-West pipeline.

   The oil supply disruption from the Persian Gulf, meanwhile, showed no signs 
of easing. Multiple tankers near the Strait of Hormuz were struck over the 
weekend, and Muscat on Sunday said that planned talks with Tehran about a joint 
shipping lane, which on Friday weighed on prices, had been postponed.




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