Saudi Arabia's exports have been hindered, and WTI has shown a stronger trend compared to Brent

The crude oil futures market witnessed a significant increase. The Houthi militants attacked the east-west oil pipeline in Saudi Arabia, which is the core channel for Saudi Arabia to transport crude oil around the Strait of Hormuz to the Red Sea. After the pipeline was forced to shut down, the crude oil loading at Yanbu Port in Saudi Arabia was stopped, and many original oil shipment orders destined for Europe were notified to be cancelled.

Data showed that Brent crude oil futures rose by $3.07, or 2.9%, to $108.75 per barrel. WTI crude oil futures rose by $4.44, or 4.38%, to $105.83 per barrel. Both of the two main contracts reached their highest closing prices since May 19th. Traders began to look for alternative sources of Middle East crude oil. The U.S. domestic WTI crude oil became an alternative supply source for European refineries, causing its price increase to exceed that of Brent.

The navigation data of the Strait of Hormuz further exacerbated market tensions. According to Kpler statistics, the number of oil tankers passing through the Strait of Hormuz on the previous day dropped to only 4. This significant reduction in the number of voyages has amplified the supply concerns in the global oil market. If Saudi Arabia's oil pipelines remain unable to be repaired for a long time, it will directly impact about 4% of the global crude oil supply.

Brent mainly represents Middle East and North Sea crude oil, while WTI reflects domestic crude oil in the United States. This incident directly changed the price difference structure between the two contracts. Saudi Arabia cancelled crude oil shipments to European customers, and European refineries had to look for alternative sources of oil. American WTI crude oil entered the purchase list. The domestic refining facilities in the United States have strong adaptability to different grades of crude oil and can flexibly switch raw materials.

Once Europe purchases WTI, the buying demand for WTI futures increases. Based on the funds' judgment, if the Red Sea export continues to be suspended, the purchasing focus of European refineries will shift to American crude oil. Under normal circumstances, Brent maintains a certain premium over WTI. When the supply from the Middle East suddenly stops, the alternative demand raises the price of WTI and reduces the price difference between the two.

Diesel futures prices have surged to new highs recently on two key supply-side risks - suspended oil output in Libya and the Russia-Ukraine conflict. The global energy supply crunch is no longer only tied to Middle Eastern market changes, as new disruptions have emerged in other key oil-producing regions.

In Libya, growing public protests have disrupted local oil operations. Security staff in charge of oil facilities have shut down the valves on the Hamada-Zawiya crude oil pipeline, directly forcing three major local oil fields to stop production completely. Libya's energy authorities have issued a warning: if the pipeline valves stay closed or more oil fields are shut down one after another, the country will have to activate force majeure and suspend all crude oil export arrangements, which will further tighten global crude supply.

At the same time, the Russia-Ukraine conflict continues to weigh on the energy sector. Both sides keep launching strikes against each other's energy infrastructure. Trump said Russia and Ukraine had agreed to stop fighting, but attacks on oil refineries and gas stations are still going on. These ongoing strikes keep severely hurting Russia's ability to refine oil. The strikes continue to hit Russia's oil refining capacity hard. In September, half of Russia's main diesel refining plants either cut output or shut down completely, severely restricting diesel supply globally and pushing futures prices to record highs.