Saudi Pipeline Damage and Houthi Threats Fuel Crude Oil Upside Risks
TD Securities strategists Ryan McKay and Bart Melek warn of elevated upside risks in crude oil markets due to attacks on energy infrastructure in Saudi Arabia and Russia. The strategists note that Commodity Trading Advisors (CTAs) remain maximally long WTI Crude, Brent Crude, diesel, and gasoline, with only volatility levels constraining their positioning.
The East-West pipeline in Saudi Arabia was damaged, with reports indicating that much of the system could be out of service for three to five weeks. This has contributed to a significant upside risk premium in crude oil pricing.
Additionally, the threat of further Houthi strikes adds to tightening risks in the market. The strategists emphasize that pipeline risks sustain the CTA long bias, and CTAs remain max long across crude oil, diesel, and gasoline markets.