Brent holds above $107 as the East-West pipeline stays shut

Brent crude traded above $107 a barrel on Monday after Saudi Arabia kept its East-West pipeline shut and Oman postponed the Salalah meeting that was supposed to ease traffic through the Strait of Hormuz. Reuters recorded Brent up $2.93, or 2.8 percent, at $107.54 at 0700 GMT. West Texas Intermediate was at $102.93, up $2.88.

Prices had already climbed about 8 to 9 percent last week and crossed $100 on Wednesday for the first time since July. Monday's open added the week's missing catalyst: the talks that some desks had treated as a reason to hold a small discount did not happen. Omani Foreign Minister Badr Albusaidi said the meeting was delayed in the interests of consensus. Iran's foreign ministry said unnamed neighbours had asked for the delay. Bahrain had already refused to sit with Tehran.

The pipeline is the mechanical problem behind the headline. Saudi Arabia's East-West line runs about 1,200 kilometres from the Gulf fields to Yanbu on the Red Sea. Capacity is commonly put near 5 to 7 million barrels a day. It exists so Riyadh can export without using Hormuz. Saudi officials said the line was shut after drones that originated in Iraq struck infrastructure in the Riyadh and Medina areas around 10-11 September. ING commodity strategists said it was still unclear how badly the pipe was damaged or how long it would stay down.

Three industry sources familiar with Saudi export schedules told Reuters that Yanbu holds enough crude for five to seven days of loadings while the line is closed. After that, either the pipe reopens or those barrels stay inland. Analysts have described the outage as a threat to as much as 4 percent of global supply if it persists.

Sunday added two more incidents. UKMTO reported a projectile strike on a vessel in the Strait of Hormuz that started a fire and forced an evacuation. Iran said a commercial ship off its coast was hit, with one person killed and crew wounded. Saudi state media released video of damage to homes and a mosque in Jazan province and blamed a Houthi attack. The Houthis said they had also struck a Saudi military base in a neighbouring province.

The market is now pricing three constraints at once. Hormuz is no longer a free transit. Iran requires permission for passage and has discussed service fees. Ships that ignore the rules have been hit. The East-West bypass is offline. And the diplomatic meeting that might have produced a temporary shipping protocol was taken off Monday's calendar.

Diesel is the product that shows the squeeze first. The U.S. national average crossed $6 a gallon last week on GasBuddy's tracker and was reported by AAA at $6.06 on Friday. Trucks, trains, ships and farm equipment all burn it. That is a midterm-election number in the United States as much as it is a freight number.

The structure of the trade has changed since February, when fighting around Iran first disrupted Gulf loadings. Brent's rise from a pre-crisis baseline near $72 is now about 50 percent on some spot series. The Brent-WTI spread widened toward $5, which is what a seaborne shock usually does: it hits waterborne crude harder than landlocked U.S. barrels.

None of Monday's print required a new theory of demand. Refineries are still running. The question is how many export barrels can physically leave the Gulf and the Red Sea this week. If Yanbu's inventory runs down and the pipe stays shut, the next bid is not a headline, it is a missing cargo.

Oman remains the only Gulf capital that both Tehran and Riyadh will take a call from. Postponing Salalah keeps that channel open and also tells the market that a deal is not ready. Bahrain's refusal set a floor under how far any communique could have gone. Iran has said it will not sign an arrangement that Washington can treat as a concession.

Traders will watch three items through the week: official word from Riyadh on when the East-West line can restart, any UKMTO notice of further hits inside Hormuz, and whether Badr Albusaidi names a new date. Until one of those moves, $100 oil is no longer the surprise. The surprise would be a settlement that puts barrels back on the water.