- US crude oil fell more than 2% on Monday as traders weighed the threat of further attacks on Saudi Arabian energy infrastructure against concerns that elevated prices could erode demand. West Texas Intermediate futures slid 2.19% to $101 a barrel, while Brent declined 1.89% to $114.51.
- The pullback followed a sharp rally on Friday, when Brent settled at its highest level since April after attacks by Yemen’s Iran-backed Houthi militants on Saudi Arabia. Over the weekend the Houthis said they had targeted Riyadh’s main airport and oil facilities, and Saudi authorities said they intercepted more missiles and drones.
- Gallo Partners CIO Michael Alfaro told CNBC that geopolitical uncertainty has already added roughly $20 a barrel to oil prices, and that Brent above $120, $130 or $140 would bring more demand destruction. He said the bigger issue is refining capacity, warning that disruptions could become a longer-term structural problem extending into 2027 and beyond.
- In the US, the Energy Department on Friday authorized the release of up to 400,000 barrels from the Strategic Petroleum Reserve to address a supply disruption at a Louisiana refinery. US producers are adding some rigs but remain cautious, with Alfaro saying “we’re not really seeing major capex additions” to bring new production online.
What Happened?
Oil fell on Monday after Friday’s surge, with WTI down 2.19% at $101 and Brent down 1.89% at $114.51. Saudi Arabia partially resumed operations at its main airport on Sunday despite damage from earlier attacks, even as the Houthis threatened further strikes. CoinDesk reported that Brent’s drop from a six-month high came after President Donald Trump said it is “getting to be decision time” on whether to reach a deal with Iran or resume attacks.
Why It Matters?
Oil at these levels feeds straight into the inflation outlook ahead of Wednesday’s Fed decision, where traders are watching for any hint of a December hike. A risk premium of roughly $20 a barrel, as Alfaro estimates, means prices could fall quickly if tensions ease, but a major strike on Saudi Arabia’s East-West pipeline or refineries could send them sharply higher. The lack of major new US drilling investment also limits how much American supply can offset any disruption.
What’s Next?
Watch for further Houthi attacks on Saudi energy assets and any move toward a US-Iran deal or renewed strikes, the two forces now driving the risk premium. Saudi Arabia also plans to begin storing crude in Singapore from the second half of 2027 to strengthen its Asian supply chain. For US markets, refining margins, gasoline prices and energy-sector capex plans are the next things to watch, along with how the Fed characterizes the oil shock on Wednesday.
