Oil hits US$100 after Houthi attack on Saudi tankers worsens oil supply disruption

OIL prices hit their highest in nearly two months on Thursday (Jul 23), rising for a fifth day after Yemen’s Houthis said they struck two Saudi oil tankers, widening disruption to global oil shipping through both the Red Sea and the Strait of Hormuz.

Brent crude futures were up by US$5.83, or 6.2 per cent, at US$99.90 a barrel by 13.10 GMT after reaching US$100 a barrel for the first time since late May.

US West Texas Intermediate crude rose US$4.41, or 5.08 per cent, to US$91.24, exceeding US$90 a barrel for the first time since June 11.

“The immediate outlook for crude oil remains supportive as markets price a worrying probability of supply interruptions in a second chokepoint,” said Pepperstone research strategist Ahmad Assiri.

Besides the renewed conflict over control of the Strait of Hormuz, the Houthis have opened a new front by targeting vessels carrying Saudi oil in the Bab el-Mandeb strait after stating they would impose a naval blockade on shipments from Saudi Arabia.

Goldman Sachs said Brent might exceed US$120 a barrel in the fourth quarter and average US$100 next year if the Strait of Hormuz remains disrupted through 2027, with further upside if the Bab el-Mandeb strait and Suez Canal also suffer persistent disruption.

The attacks open a new front in the months-long regional conflict, which is once again throttling tanker flows from the Persian Gulf as the ceasefire between the US and Iran collapses into a new round of hostilities.

Targeting the Red Sea imperils the critical detour route that the Saudis used to keep barrels flowing – and limit fallout for the global economy – while the Strait of Hormuz remains disrupted. 

Iran’s Revolutionary Guards said an oil tanker caught fire after an explosion while attempting to follow a mined route in the southern area of the strait near the coast of Oman and that two others had turned back.

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The Guards said the strait was under their control and “completely closed” while US actions continued in the region, warning that no tanker would be allowed to enter or leave without coordination with Iran. The US military said it had completed a 12th consecutive night of attacks on Iran, hours after US President Donald Trump vowed to destroy an Iranian bridge or power plant every time Iran shoots at a ship in the Strait of Hormuz.

It also comes as exports from major producer Kazakhstan are endangered by the Russia-Ukraine war, and the world’s oil inventories are depleted by months of conflict, risking a painful price spike. 

In recent days, Iran has struck vessels in Hormuz, while the US has bombarded the Islamic Republic over the past 12 days and restored a blockade of its ports. Teheran has responded by attacking US allies in the region.

“Round 2 of the military conflict is going to be broader than round 1,” Bob McNally, president of Rapidan Energy Group and a former White House official, said in a Bloomberg television interview. “The risks are great, not only to shipping, but also to energy infrastructure.” 

Still, two China-owned oil tankers appeared to be undeterred by the risk, with one exiting the Red Sea’s Bab el Mandeb and another on course to follow, according to ship-tracking data.

Washington and Teheran have both played down the prospect of peace talks, raising the possibility of prolonged hostilities that could tighten oil markets. President Donald Trump threatened to bomb bridges and power plants, and reiterated threats to strike Pickaxe Mountain, a suspected Iranian nuclear site.

Meanwhile, Kazakhstan is being forced to stop piping crude to its main export terminal on Russia’s Black Sea coast – the Caspian Pipeline Consortium facility – following a spate of drone attacks on tankers. BLOOMBERG, REUTERS