Brent crude oil prices surged past $100 per barrel on Thursday, marking the first time since May that the benchmark has crossed this threshold. The rally followed an attack on a Saudi-flagged tanker in the Red Sea, intensifying concerns about potential supply disruptions beyond the Strait of Hormuz.
Brent climbed 7% to $100.71, while West Texas Intermediate crude rose 6% to $92.01, topping $90 for the first time since June 11. The attacks targeted the vessels Encelia and Layla, with Saudi state media confirming the Encelia was hit but the crew was unharmed. The Houthis claimed responsibility for targeting the Layla, though this could not be independently verified.
The incident highlights the vulnerability of Saudi Arabia's alternative export route through the Red Sea. The kingdom relies on the East-West pipeline to transport up to 5 million barrels per day to the Yanbu terminal on the Red Sea, bypassing the Strait of Hormuz. However, the Red Sea terminus is now exposed to attacks, forcing tankers to take longer, costlier routes.
Rerouting a tanker from Yanbu to Asia via the Suez Canal adds approximately 34 days and more than $6 million in additional costs per vessel. For a 2-million-barrel shipment, this translates to over $3 per barrel, excluding extra fuel and insurance expenses. The extended journey of nearly 10,000 nautical miles underscores the logistical challenges facing the market.
The divergence between oil prices and energy stocks suggests investors view the surge as a temporary route premium rather than a fundamental shift in earnings outlook. Exxon Mobil rose 2.0% to $157.59, and Chevron added 1.7% to $196.24, both lagging Brent's 7% gain. Valero Energy declined 0.2% to $310.39, trading opposite crude's direction.
Physical market data indicates declining activity at key chokepoints. Over the past seven days, Gulf loadings dropped to 2.5 million barrels per day, compared with a 30-day average of 6 million barrels per day. Vessel traffic at Bab el-Mandeb fell to 27 ships on Wednesday, down from 38 on Tuesday, while the Hormuz strait recorded just three commodity vessels, compared with 18 the previous week.
Two supertankers carrying 4 million barrels of Saudi crude for China were navigating the route on Thursday, serving as a test of the Red Sea's viability for commercial shipping. Meanwhile, Saudi Aramco is expanding alternative export channels, offering more spot cargoes from the Sidi Kerir terminal in Egypt, though loadings there have averaged 427,000 barrels per day this year, down from 735,000 barrels per day last year.
TotalEnergies reported a 67% jump in adjusted net profit to $6 billion for the second quarter, with refining and chemicals income soaring 362% to $1.8 billion. CEO Patrick Pouyanné noted that the risk of crossing Hormuz is extremely high, and sporadic openings may become the new norm.
The market faces risks in both directions. A safe-passage agreement could quickly eliminate the route premium, while further attacks might block both ends, driving up inflation and reducing oil demand. Traders are closely watching verified tanker movements, Gulf departures, and Sidi Kerir loadings to determine whether $100 holds as a support level or marks a temporary peak.
