Brent up 2.6% to $107.28 after Saudi pipeline shutdown and Hormuz traffic falls to single digits a day
Brent crude rose 2.6% to $107.28 a barrel after Saudi Arabia shut its main East-West pipeline and vessel traffic through the Strait of Hormuz fell to single digits a day. Crude was near $72 before the Iran war started in late February. Higher crude feeds straight into wholesale gasoline and diesel, so buyers could see rack prices keep climbing until the supply picture clears.
The Saudi pipeline
Saudi Arabia shut the East-West pipeline after drone attacks launched from Iraq near the Iranian border, which caused injuries. The kingdom called it a precautionary move. The line carries crude across the country to the Red Sea so shipments can skip the Strait of Hormuz. With it offline, that backup route is gone. Asian refiners say they do not yet know how the shutdown affects loadings at the port of Yanbu.
Hormuz traffic
Fourteen commodity vessels crossed Hormuz in either direction over the weekend, single digits per day, against a 10-day average of 14. The strait carries a large share of the world's seaborne crude, and thin traffic there plus a closed bypass line is why the risk premium jumped. If loadings stall, the barrels that would have moved have to come from somewhere else, and that pressure shows up at the pump.
Refiner margins
Refining margins have run to record highs, and CNBC is asking what comes next. Wide margins mean refiners are earning a big spread between crude and finished product, good for them, less so for anyone buying the product. For fuel buyers, a wide crack spread means the pump may not follow crude down quickly even if crude eases.
BP Whiting
Negotiations resumed at BP's Whiting refinery in Indiana, where union workers have been locked out for months. Whiting is one of the largest refineries in the Midwest and a key supplier to Chicago-area markets. A drawn-out labor fight there is a supply risk for the region on top of the crude story.
Venezuela at the G20
Venezuelan energy officials are heading to the G20 energy summit in Houston, where the US is courting investment in Venezuelan crude. More Venezuelan barrels would help Gulf Coast refiners that run heavy crude, but not this week and not at the rack.
What to watch
Whether Saudi Arabia restarts the East-West line, and how fast Yanbu loadings recover. Whether Hormuz traffic picks back up off single digits. And whether the Whiting talks produce a deal or drag on, since that supply risk sits on top of an already tight crude market.