Oil Prices Surge Over $3 as Saudi Arabia Halts Loading at Yanbu, Cancels European Crude Shipments – Brent Nears $110

New York oil prices rose sharply on Tuesday (15th), with both Brent crude and U.S. West Texas Intermediate (WTI) reaching their highest closing levels since May 19. Market concerns intensified over potential extended supply disruptions after attacks on a key Saudi Arabian oil pipeline forced the temporary suspension of crude loading at the Red Sea port of Yanbu, and Saudi Arabia canceled部分 crude cargo deliveries to European customers scheduled for late September.

Brent crude futures gained $3.07, or 2.9%, closing at $108.75 per barrel. WTI crude futures rose $4.44, or 4.38%, ending at $105.83 per barrel. The stronger rally in WTI reflects market expectations that European refiners may turn to U.S. crude to fill the gap left by reduced Saudi supplies.

Supply pressures widened further. Shipping sources confirmed that Saudi Arabia's main Red Sea crude export hub, Yanbu, had stopped loading crude on Tuesday. Trading and shipping sources also reported that Saudi Arabia notified European clients that部分 crude cargoes scheduled for loading in late September would be canceled. Saudi Aramco, the state-owned oil company, did not immediately comment on these reports.

Yanbu's strategic importance has grown amid escalating Middle East tensions. With the Strait of Hormuz severely disrupted by regional hostilities, Saudi Arabia has relied on its approximately 1,200-kilometer East-West Pipeline over the past six months to transport crude from its eastern oilfields to Yanbu on the Red Sea coast, bypassing the Strait of Hormuz to maintain部分 external exports.

However, Yemen's Houthi rebels attacked the East-West Pipeline on Friday, forcing Saudi Arabia to shut down this critical export corridor. The Houthis launched another round of attacks on Monday, heightening market concerns about sustained assaults on Saudi energy infrastructure and prolonged supply interruptions.

The halt in loading at Yanbu quickly impacted the physical market. Reuters reported that部分 physical crude prices in Europe had already exceeded $130 per barrel on Tuesday, as buyers actively sought alternative Middle Eastern crude sources. North Sea Forties crude prices rose to $136.75 per barrel, nearing the historical peak of $147.37 set on April 13. Physical crude prices often exceed Brent futures because delivery timelines are earlier.

Market participants noted that Saudi Arabia's cancellation of部分 European crude supplies could force European refiners to increase purchases of U.S. crude, further boosting WTI's relative performance against Brent. Andy Lipow, president of Lipow Oil Associates, said traders are betting that the export disruption will last longer than initially expected, and U.S. refiners' flexibility in processing different crude grades could increase demand for low-sulfur crudes like WTI.

Supply risks extend beyond Saudi Arabia. Libya's National Oil Corporation announced that protests led to the closure of a valve on the Hamada-Zawiya crude export pipeline, halting operations at three oil fields. Facilities warned that if demands remain unmet, the scope of production stoppages could expand. The National Oil Corporation stated it might declare force majeure if valves remain closed or more fields are forced offline.

Ongoing attacks on energy infrastructure by Russia and Ukraine are also exacerbating refined product supply concerns. U.S. diesel futures and diesel crack spreads hit record closing highs on Tuesday. According to Reuters calculations based on fuel market participant data, half of Russia's six major diesel-producing refineries were operating at significantly reduced capacity or fully shut down in September due to damage from drone attacks.

Saudi Arabia's export outlook is further constrained by inventory limits. Buyers and traders indicated that if the East-West Pipeline remains offline, Saudi Arabia could exhaust its available exportable crude inventories within days. The attack on the pipeline is estimated to threaten up to 4% of global crude supply.

Earlier Reuters reporting noted that Yanbu's current inventory can support only 5 to 7 days of exports, with port storage capacity around 35 million barrels. Saudi Arabia also holds inventories at Ain Sukhna on the Red Sea and Sidi Kerir on the Mediterranean in Egypt, with storage capacities of about 18 million and 20 million barrels respectively. However, these facilities are not fully filled, and if the pipeline isn't restored, they too face eventual depletion.

Saudi Arabia's August crude output has already dropped to about 6.2 million barrels per day, far below the 10.9 million barrels per day recorded in February before the conflict began. The International Energy Agency (IEA) estimates that global oil supply could fall by 5.7 million barrels per day this year—equivalent to about 6% of global supply—with Middle East conflicts reducing oil flow through the Strait of Hormuz to about 6 to 9 million barrels per day.

Markets are closely watching the repair timeline for the East-West Pipeline. Goldman Sachs assessed repair times ranging from 'soon' to up to eight weeks. U.S. Energy Secretary Chris Wright expects the key Saudi pipeline to resume operations within days. However, if repairs take longer than anticipated, supply pressures could deteriorate rapidly.

Goldman Sachs further warned that repeated attacks on energy infrastructure have increased the likelihood of Brent exceeding $120 per barrel. If Gulf region average oil production remains 4 million barrels per day below pre-war levels through 2027, oil prices could face even greater upward pressure.

Maritime traffic through the Strait of Hormuz continues to decline. Preliminary Kpler data showed that only four commercial vessels passed through the strait on Monday, down from ten the previous day, indicating that global energy transportation remains severely constrained.

Amid rising supply risks, European refiners have begun seeking alternative crude sources. Poland's Orlen is actively sourcing crude cargoes from the North Sea and other regions to offset disruptions in Saudi supplies. Since 2022, Saudi Aramco has been Orlen's largest crude supplier, accounting for about 40% of its crude intake. Orlen has recently procured North Sea Grane, Johan Sverdrup, and Johan Castberg crude through spot tenders. Sources also revealed the company has inquired about U.S. WTI Midland and Kazakhstan's CPC Blend, and is further exploring supplies from the North Sea, Algeria, and Guyana.

Overall, markets face multiple overlapping risks: damaged Saudi pipelines, halted exports from Yanbu, canceled European crude cargoes, declining maritime traffic through the Strait of Hormuz, and energy supply disruptions in Libya, Russia, and Ukraine. If the Saudi pipeline cannot be restored quickly, the global crude market could shift from 'tight supply' to actual shortages, increasing the risk of oil prices surging toward $120 per barrel or higher.