Brent gained as high as 3.7 percent to more than USD 108 a barrel just before it pared gains to strike above $108 a barrel, given that Saudi Arabia disclosed on Friday evening that it had shut its East-West pipeline as a preemptive first response to attacks on that day. Bonny Light traded above $115 per barrel over the weekend on macro energy s t re n g t h / g ra n d – d a t e d Brent proxies.
Light, sweet Nigerian grades maintain a healthy-to-positive quality premium over heavy/ sour peers amid continued European and Mediterranean refinery appetite for low sulfur yield. However, regional freight and prevailing prompt liquidity fluctuations impose a ceiling. Price metrics remain highly sensitive to macro geopolitical risk cues (Middle East supply concerns lift benchmark Brent into the $107/bbls territory).
On the diplomatic side, a meeting scheduled later Monday between Iran and a group of Persian Gulf states on a temporary shipping corridor through Hormuz was postponed, Omani foreign minister Badr Albusaidi said. Bahrain earlier said it was not participating in the talks, partly due to the East-West pipeline strike, and Axios reported Riyadh was hesitant about the proposal. Oil traders considered the regional implications of a fast-moving military campaign by Iranian-backed Houthi fighters along Yemen’s Red Sea coast, which would give the group a freer hand in overseeing shipping through the Bab el-Mandeb strait.
Crude has climbed more than 75 percent so far this year as the US-Iran standoff spilled into other countries in the region, pulling down supplies and throwing shipping markets into chaos. On the demand side, however, recent buying by China, the world’s biggest crude importer, has also lent support to crude prices. The Middle East emergency has hit the world economy with an inflationary blow, as the cost of crude, natural gas and petroleum derivatives such as diesel soared. Following US reports that the rate of inflation accelerated in August, the Federal Reserve is likely to raise rates this week.
