Brent tops $108 after Saudi East-West pipeline stays shut

Brent crude traded as high as $108.65 a barrel on Monday and was last indicated around $107.6 by late morning in London, up about $3 on the day. West Texas Intermediate added more than $2.50 to sit near $102.5. The move extends last week's jump, when Brent crossed $100 for the first time since July and printed near $110.

The price is doing a simple job. Two export doors out of the Gulf are impaired at the same time. The Strait of Hormuz, which in peacetime moves about 20 million barrels a day, has been reduced to a trickle under Iranian control. Reuters vessel tracking counted 14 commodity ships through the strait across the whole weekend, single digits per day, against a recent 10-day average of 14 ships a day. Only four commodity vessels left the Gulf on Saturday and Sunday combined. Flows through the waterway have fallen from around 20 million barrels a day before the war to about 7 million.

Saudi Arabia's answer to that blockade had been the East-West pipeline, also called Petroline, which carries crude 1,200 kilometres from the eastern fields to Red Sea terminals at Yanbu. Riyadh said drones launched from Iraq hit the line in eight places last week. Satellite images showed damage at least at two pump stations. The oil ministry has not given a date for restart. The line's nameplate capacity is cited in market notes at about 5 to 7 million barrels a day depending on the source. Analysts at several desks treat a prolonged outage as a risk to as much as 4 percent of global supply.

Yanbu is now running on tanks. Three industry sources told Reuters the port holds five to seven days of export inventory at the current pace. A separate DTN note put maximum storage at 35 million barrels, enough for about nine days at present loadings. Exports from Yanbu continued on Monday by drawing those stocks. Janiv Shah at Rystad said the relatively contained price reaction implies the market still expects inventory to cover the near term, and that the tone changes if the outage lasts beyond that cushion.

Diesel is the product that has already broken. U.S. retail diesel set a record of $6.20 a gallon on Sunday. NYMEX ultra-low-sulfur diesel for October traded above $5.06 a gallon on Monday morning. UK gas rose 5 percent to 208.73 pence a therm, the highest since December 2022. President Donald Trump, speaking in Ireland on Sunday, told reporters he had asked Volodymyr Zelenskyy to stop hitting Russian diesel plants because those strikes were adding to the shortage. He said Middle East fighting was not the main cause of the U.S. pump price.

Oman postponed Monday's Salalah meeting between Iran and Gulf states on a temporary Hormuz lane. That meeting was the one diplomatic item on the calendar that might have put a few more tankers back on a permitted track. Its delay left traders with the pipeline outage, thin Hormuz traffic, a projectile strike on a merchant ship in the strait on Sunday, and the Houthi seizure of the Hanish islands on the Red Sea substitute route.

President Trump said the United States is escorting more oil through Hormuz and making progress on reopening the waterway. Prices rose anyway. The market is trading barrels that can load this week, not statements about escorts. If Yanbu's tanks last into next week and the East-West line stays dark, the next bid is for replacement crude from the Atlantic Basin and for products already in OECD stocks. That is a slower, more expensive chain than a working pipeline to the Red Sea.