Brent Jumps Above 107 As Saudi East-West Pipeline Shutdown Threatens 4 Percent Of Supply
Oil extended its rally on Monday after a drone strike shut Saudi Arabia's East-West pipeline, the main route for bypassing the Strait of Hormuz, while fresh attacks on shipping in the Gulf and the Red Sea compounded supply fears. European gas and coal firmed in sympathy as storage levels stayed well below seasonal norms.
Brent crude futures rose about 2.8 percent to 107.51 dollars a barrel, after touching a session high of 108.65 dollars, while WTI gained roughly 2.3 percent to 102.32 dollars. The move followed confirmation from Saudi officials that the East-West pipeline had been temporarily shut after a drone attack originating in Iraq. The line had allowed the kingdom to move crude to the Red Sea and avoid Hormuz entirely, and its loss puts up to 4 percent of global oil supply at risk.
The outage leaves the Red Sea port of Yanbu with only five to seven days of export cover, according to industry sources, so the market is now pricing how quickly the line can be restored. Shipping risk widened at the same time: a vessel in the Strait of Hormuz was struck by a projectile and its crew evacuated, Iran reported one death and four wounded aboard a commercial ship off its coast, and Houthi forces reached the island of Perim in the Bab el-Mandeb strait, a lane that has been carrying 4 to 5 percent of global supply.
Fundamentals already pointed to a tighter balance before this week. The US Energy Information Administration raised its 2026 Brent forecast by close to 5 percent to about 91 dollars a barrel and WTI to 84.65 dollars, citing global inventories that have fallen by roughly 400 million barrels this year. Middle East output shut-ins rose to 6.7 million barrels a day in August from 5 million in July, and the agency expects regional volumes to return to pre-conflict levels only in the second quarter of next year.
European gas and coal tracked crude higher. Dutch TTF approached 84 euros per megawatt-hour on Monday, up more than 3 percent on the day, while EU storage sat near 68 percent full with Germany around 56 percent and the Netherlands near 52 percent. Asian LNG remained the competing bid, with October JKM near 28.72 dollars per million Btu against Henry Hub spot around 2.76 dollars, a spread that keeps flexible US cargoes pointed toward Europe.