Oil Hits US$104 on Pipeline Strikes and Hormuz Slump

Global crude oil reached US$104 per barrel on Friday (September 18) as physical pipeline damage and collapsing shipping traffic through the Persian Gulf accelerated a fresh wave of fuel price spikes.

The global benchmark Brent crude rose US$0.35 from Thursday's US$103 level, extending a month-long 12 percent gain and standing almost 55 percent higher than its US$67.68 price one year ago.

The rise in crude costs is feeding directly into consumer fuel markets, pushing the US national average for regular gasoline to US$4.44 per gallon and diesel to a record US$6.40 per gallon.

The cost acceleration follows physical strikes on Saudi Arabia's 745-mile East-West pipeline, the kingdom's primary overland bypass around the Strait of Hormuz linking eastern oil fields to Red Sea export terminals.

Satellite imagery confirmed heavy damage to at least two pumping stations along the route, alongside a strike on an Aramco bulk plant in Abha. Iran-backed Houthi rebels also claimed responsibility for launching dozens of ballistic missiles and drones at an Aramco facility in Yanbu.

At the same time, transit through the Strait of Hormuz remains severely restricted. Only four commodity vessels moved through the chokepoint on Thursday, down from a 10-day daily average of 16 ships.

Deprived of its primary export pipeline to the Red Sea, Saudi Arabia has resorted to selling spot crude cargoes for ship-to-ship transfers off the coast of Oman to bypass the Persian Gulf entirely.

The infrastructure failures have undone mechanisms that previously cushioned global supply shocks following the launch of US military operations against Iran on February 28.

Rapidan Energy Group founder Bob McNally told the Washington Post that the safety net previously relying on China's reduced imports, strategic oil releases, and the Saudi pipeline has broken down as the US Strategic Petroleum Reserve runs dry and Chinese crude demand rebounds.

In response to skyrocketing domestic fuel costs, US lawmakers are weighing market interventions. Senate Majority Leader John Thune previously said he is open to exploring a federal ban on diesel exports to protect domestic supplies.

However, economists warn that restricting exports would fail to resolve the underlying shortage of domestic refining capacity and risks worsening the global energy crunch.

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.