Oil prices rose nearly $3 on Tuesday after a report said oil loadings at Saudi Arabia's Red Sea port of Yanbu have been suspended, and Libya halted operations at three oil fields, heightening concerns that disruptions to key oil supply routes could persist for weeks.
Brent crude futures were up $2.81, or 2.66 per cent, at $108.49 a barrel at 11:06 ET (15:06 GMT), while US West Texas Intermediate futures were up $3.29 at $104.68 a barrel.
If prices hold, both contracts would be on track to close at their highest in nearly four months.
Supply concerns have intensified after Iran-backed Houthi forces in Yemen launched fresh attacks on Saudi Arabia on Monday, while Persian Gulf Arab states postponed planned discussions with Iran.
The latest strikes followed a Houthi attack on Saudi Arabia's East-West Pipeline on Friday that forced the kingdom, the world's largest crude exporter, to shut the vital export route.
Further underscoring supply risks, shipping industry sources told Reuters on Tuesday that oil loadings at Saudi Arabia's Red Sea export terminal in Yanbu had been suspended. The report came after sources said Riyadh had informed European customers that some late-September crude cargoes would be cancelled.
In Libya, separately from the Iran conflict, the National Oil Corporation (NOC) said operations at three oil fields were suspended after protesting members of the Petroleum Facilities Guard shut a valve on the Hamada-Zawiya crude export pipeline.
The Guard warned the shutdown could be expanded if its demands are not met. The NOC said it may declare force majeure if the valve remains closed or if additional fields are forced to halt production.
Libya was the seventh-largest crude oil producer in OPEC in 2023, according to the US Energy Information Administration.
Meanwhile, continued attacks on energy infrastructure in Russia and Ukraine pushed US diesel futures up more than 5.9 per cent, putting them on track for a record close.
"Fresh attacks by the Houthis targeting Saudi Arabia may be influencing oil market investors' expectations about the severity and duration of the conflict," said Hamad Hussain, senior climate and commodities economist at Capital Economics.
The Houthis said on Monday they fired dozens of missiles and drones at a military air base in Khamis Mushait in southern Saudi Arabia, targeting aircraft hangars, radar systems, runways and ammunition depots in retaliation for Saudi airstrikes in Yemen.
This followed attacks on Friday on Saudi Arabia, which Riyadh blamed on Iranian-backed fighters in Iraq, that disrupted the country's East-West Pipeline, which allows oil exports to bypass the blockaded Strait of Hormuz, through which about a fifth of global oil supplies passed before the US-Iran war.
Saudi Arabia could exhaust crude available for export within days unless the East-West Pipeline resumes operations, according to buyers and traders. The pipeline strike threatens up to four per cent of global oil supply.
"The recent attack may be more severe and could threaten the remaining two mb/d of recent Yanbu exports, with the latest repair assessments ranging from 'very soon' to eight weeks," Goldman Sachs said in a note.
The attacks on oil infrastructure marked a meaningful escalation of the conflict and increased the probability of Brent rising above $120 a barrel, Goldman Sachs said, citing a scenario in which average gulf oil output in 2027 remains 4 million barrels per day below pre-war levels.
Commodity vessel traffic through the Strait of Hormuz dropped to four on Monday, down from 10 a day earlier, preliminary data from Kpler showed on Tuesday.
"In the absence of an adjustment in demand or greater oil flows through the Strait of Hormuz, several weeks of the East-West Pipeline being closed could lift Brent crude prices towards $130 per barrel," Hussain said.
Russia hit petrol stations in Kyiv on Tuesday and Ukraine struck a Russian oil refinery, as the warring sides carried on with strikes on each other's energy targets despite an announcement by US President Donald Trump that they had agreed to stop.
Half of Russia's six top diesel-producing refineries were forced to significantly cut back or completely halt output in September due to damage sustained in drone attacks, according to Reuters calculations based on data from fuel market participants.
(Reporting by Colleen Howe in Beijing and Anushree Mukherjee and Pranav Mathur in Bengaluru. Editing by Louise Heavens, Kirsten Donovan, Mark Potter and Nick Zieminski)