Oil stocks rose as Saudi Arabia reported drone attacks on pumping stations, the latest escalation in Middle East tensions after tankers were hit by sabotage over the weekend.
Futures gained 1% in New York, reversing Monday’s drop. Unidentifieddrones attacked two pumping stations belonging to Saudi Aramco, forcing the state oil company to suspend operations in the area to assess what the kingdom said was a “limited” impact. That follows damage to oil tankers anchored off the United Arab Emirates on Sunday.
Oil volatility has jumped this month as crude is buffeted by the specter of a full-blown trade war on the demand side, while a combustible Middle East and production disruptions from Norway to Nigeria are throwing the supply outlook into doubt. U.S. drilling activity and a pending decision by the Organization of Petroleum Exporting Countries and its allies on whether output curbs will be extended are taking a back seat to the various crises.
“We are witnessing a tussle between economic concerns and tightening oil-market balance,” said Tamas Varga, an analyst at PVM Oil Associates Ltd. in London.
West Texas Intermediate crude for June delivery advanced 58 cents to $61.62 a barrel on the New York Mercantile Exchange at 8:42 a.m. local time. The contract closed down 62 cents at $61.04 on Monday.
Brent for July settlement was up 1.3% at $71.17 a barrel on the London-based ICE Futures Europe exchange, after losing as much as 0.4% earlier. The global benchmark contract traded at a $9.37 premium to WTI.
Pump stations eight and nine on the East-West pipeline, which carries oil from Saudi Arabia’s eastern province to the Red Sea port of Yanbu, were attacked by armed drones, Energy Minster Khalid Al-Falih said in a statement. That ignited a fire that caused minor damage to station number eight, but it was eventually brought under control.
Exports Continue
Aramco took precautionary measures and temporarily stopped the pipeline, and is now evaluating the situation and working on restoring operations, according to the statement. Exports of crude oil and products are continuing as normal, Al-Falih said.
Houthi rebels in neighboring Yemen — who have long received backing from Iran — said earlier that they had targeted key Saudi installations with drones.
While the precise nature of the attacks on pumping stations or tankers remains unclear, they amplify tensions in the region. Antagonism between the U.S. and Iran intensified this month after President Donald Trump ended exceptions to sanctions on Iranian oil sales.
The Islamic Republic has previously threatened to block oil shipments through the Strait of Hormuz if the sanctions halt its energy exports. The U.S. deployed an aircraft carrier, bomber planes and defense missiles to the region last week.
