US crude tops $105 as Saudi Arabia cancels shipments after pipeline shutdown

Crude oil prices rose on Tuesday after Saudi Arabia reportedly canceled some shipments after drone attacks forced the kingdom to shut down a major oil export pipeline.

At the close, US West Texas Intermediate crude rose 4.4% to $105.83 a barrel, its highest closing level since May 19. Brent crude futures, the global benchmark, climbed 2.9% to settle at $108.75 a barrel. Prices have surged more than 20% this month as fighting in the Persian Gulf region has escalated sharply.

Trade sources told Reuters that Saudi Arabia had informed European customers that some crude oil shipments scheduled for delivery in September had been canceled.

Saudi authorities described the shutdown of the East-West pipeline as a “precautionary measure,” but provided neither an assessment of the damage nor an estimate of how long the pipeline would remain out of operation. Riyadh shut down the oil artery after it was damaged last week in a drone attack launched from Iraq.

US Energy Secretary Chris Wright told CNBC on Tuesday that he expects the pipeline to resume operations within days.

“This will be a short and temporary outage,” Wright said.

Oil supply risks escalate

Saudi Arabia had been rerouting crude oil exports through the pipeline to the Red Sea as the United States and Iran vie for control of the Strait of Hormuz. The pipeline has a capacity of 7 million barrels per day.

In Libya, the National Oil Corporation suspended operations at two oil fields and a pumping station amid protests, Reuters reported.

Meanwhile, Iran-backed Houthi militants in Yemen launched fresh attacks on Saudi Arabia this week. The militants fired drones and ballistic missiles toward the cities of Khamis Mushait, Abha and Taif, according to a spokesperson for the Saudi-led military coalition in Yemen.

Tensions persist in the Strait of Hormuz

The security situation in the Strait of Hormuz remains volatile, with at least one oil tanker and another vessel coming under attack since Saturday, according to incident reports from the United Kingdom Maritime Trade Operations center.

US Central Command, or CENTCOM, denied a claim by Iran’s Islamic Revolutionary Guard Corps that the Panama-flagged oil tanker El Gaia had struck a naval mine in the strait.

“The Panama-flagged oil tanker El Gaia was struck by an Iranian missile last month, rendering it inoperable. The IRGC’s false claim is another example of their lies and intimidation tactics as they attempt to disrupt commercial shipping through the strait,” CENTCOM said.