Oil Benchmarks Breach $100 as Saudi Pipeline Strikes Escalate

Brent crude traded above $107 per barrel on Monday. US West Texas Intermediate crude reached $103 per barrel. Tapis, the regional benchmark for Australia, hit $110 per barrel. This represents a 46 percent increase since July. The price spike follows the destruction of Saudi Arabia's East-West pipeline. The pipeline had served as a critical bypass for the Strait of Hormuz. Analysts warn that global oil inventories could reach critical lows within five to 11 weeks. The loss of this route forces markets to rely more heavily on the contested strait.

Yemen's Houthis fired missiles and drones at the Khamis Mushait air base. The attack occurred overnight and targeted southern Saudi Arabia. This escalation follows a Thursday strike that disabled the East-West pipeline. The Houthis also captured Perim Island at the mouth of the Red Sea. A British maritime security agency reported another vessel struck by a projectile in the strait. The crew was evacuated after the ship caught fire. These events have turned the Red Sea and inland Saudi Arabia into active war zones.

Supply routes face simultaneous disruption

The Strait of Hormuz handles roughly 20 percent of global oil supply. The East-West pipeline previously allowed tankers to bypass this chokepoint. Its closure has altered the market dynamics significantly. Commonwealth Bank strategist Vivek Dhar noted the shift in required flows. Pre-war, 40 to 45 percent of flows through Hormuz maintained inventory levels. Now, 65 to 70 percent of pre-war flows are required. This change reflects the loss of the pipeline bypass. The US has resisted Saudi requests for direct military intervention. Washington continues to provide intelligence support to the coalition.

Retail fuel prices expected to rise

The Tapis price directly influences wholesale petrol costs. NRMA states the gap between wholesale and retail prices has vanished. This eliminates the buffer for retailers. The average price of unleaded petrol is currently $2.19 per litre. The national average for diesel has risen to $2.68. NRMA spokesperson Peter Khoury confirmed the upward trajectory for motorists. He noted that prices would fall if the conflict de-escalated. However, current analyst reports do not suggest a quick resolution. The market is adjusting to the new supply constraints.

Inventory levels approach critical thresholds

Global markets are running low on stockpiles. The low estimate for remaining supplies is five to 11 weeks. The base case estimate was 15 to 20 weeks. The base case assumed 30 percent flow through Hormuz. It also assumed subdued Chinese imports and rising non-OPEC+ supply. These assumptions no longer hold. The closure of the Saudi pipeline has removed a key safety valve. Analysts describe the current state as materially altered. The likelihood of the low inventory scenario is growing. The market is pricing in the risk of a sharp supply deficit.