Oil falls more than 2% over risks to Saudi Arabia — CNBC

Oil prices fell by more than 2% as investors assessed the threat of new attacks on Saudi Arabia’s energy infrastructure alongside the risk of declining demand due to high prices. CNBC reports.

Risks to supply and demand

Gallo Partners Chief Investment Officer Michael Alfaro said that the geopolitical risk premium embedded in oil prices amounts to about $20 per barrel. In his assessment, a significant strike on Saudi Arabia’s East-West pipeline or additional damage to oil refining infrastructure could sharply raise prices.

At the same time, Alfaro believes that a further rise in Brent prices to $120–140 per barrel would lead to a reduction in demand. He also noted that the greater challenge for the global energy market could be not only crude production, but also constraints on refining capacity. In his view, disruptions at refineries could turn into a long-term structural problem that would persist into 2027 and beyond.

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Measures by Saudi Arabia and the United States

Saudi Arabia plans to begin storing oil in Singapore from the second half of 2027. According to the energy ministers of both countries, the move is intended to strengthen the resilience of Saudi Arabia’s supply chain to Asia.

In the United States, the Department of Energy on Friday authorized the release of up to 400,000 barrels from the Strategic Petroleum Reserve due to supply disruptions at an oil refinery in Louisiana. The prospects for additional production in the United States remain uncertain: oil companies are cautious about major investments amid volatile prices and geopolitical risks. Alfaro noted that U.S. producers are adding individual drilling rigs but are not showing a significant increase in capital spending on new wells or the launch of additional production.