Oil prices surge as Saudi pipeline outage, Libya shutdowns add to supply fears

Oil prices surged as fresh supply threats from Saudi Arabia and Libya compounded losses already stemming from the Iran war.

Brent crude, the global benchmark, closed almost 3% higher near $109 a barrel in Tuesday’s trade before settling around $108 a barrel. West Texas Intermediate climbed more than 4% during a volatile trading session that swung on developments in West Asia and the Russia-Ukraine war.

Investors would also closely watch how long Saudi Arabia’s East-West pipeline would stay shut as drone strikes forced its closure last week. Saudi Aramco has since pushed back oil deliveries to some European buyers this month, according to a Bloomberg report.

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The pipeline runs the full length of the Arabian Peninsula and has served as a critical workaround during the Iran war, letting millions of barrels bypass the Strait of Hormuz altogether.

US Energy Secretary Chris Wright told CNBC on Tuesday that the outage “will be measured in days” and reiterated that the pipeline could resume operations “very soon.” Saudi Arabia has given no timeline for restoring flows, though UK officials believe the shutdown could stretch to six weeks.

Libya added to the pressure, as authorities there shut down multiple oil fields and are weighing a force majeure declaration after the Hamada-Zawiya pipeline was closed.

Brent has climbed roughly 75% so far this year. Combined with the Russia-Ukraine war, the extended West Asia conflict has fuelled inflation and pushed 10-year US Treasury yields to their highest level since 2007.Prices had briefly softened earlier in Tuesday’s session after Oman’s state media reported talks between Washington and regional parties aimed at easing tensions, alongside renewed attempts to get Russia and Ukraine to stop striking energy infrastructure.

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That de-escalation push did little to slow Ukrainian attacks on Russian refineries, however, which have kept diesel prices climbing. Kyiv said it struck the Syzran refinery in Russia’s Volga region overnight, extending a campaign that has driven diesel futures to record levels.