Oil Prices Surge Past $104 on Saudi Pipeline Attack, Chinese Demand

Oil prices surged sharply higher on Tuesday, with the U.S. benchmark gaining over $3.50 per barrel, driven by renewed Middle East supply disruptions and a record rally in China's crude futures market. West Texas Intermediate (WTI) crude settled at $104.98 per barrel, a gain of $3.59 or 3.54%. The international benchmark Brent crude rose $2.40 to $108.08 per barrel.

The price spike follows a drone attack late last week on the East-West oil pipeline in Saudi Arabia, according to reports from OilPrice.com. The attack forced the Kingdom to temporarily shut down the pipeline, which is used to bypass the Strait of Hormuz. As of Tuesday, no timeline had been given for its return to service, intensifying market fears about the security of Middle Eastern supply.

Simultaneously, China's yuan-denominated crude oil futures on the Shanghai International Energy Exchange soared to a record high of 929.4 yuan, or approximately $138.50 per barrel, according to data compiled by Bloomberg and reported by both OilPrice.com and Rigzone. The contract, launched in 2018, had never been so expensive. The rally is attributed to both the Middle East supply threats and increased purchasing by Chinese refiners, who have been ramping up crude buys in recent weeks.

For Bakken operators, the rally directly improves netback pricing. The Bakken crude differential to WTI was reported at -$3.42 per barrel. With WTI above $104, this implies a wellhead price near $101.56, providing a significant revenue boost for production. The high price environment is further supported by a tight diesel market. According to OilPrice.com, U.S. on-highway diesel prices hit a new weekly record of $5.967 per gallon on September 7, surpassing the previous 2022 high. The 2026 annual average for diesel is now on track to set a new record, underscoring strong demand for middle distillates, a key product slate for Bakken crude.

While gasoline prices also rose to $4.157 per gallon, they remain below their 2022 peak. The divergence highlights the industrial and commercial strength supporting diesel, a positive indicator for crude demand from the transportation and industrial sectors that dominate Bakken crude's market.

The combination of geopolitical risk premiums and tangible demand from China creates a supportive price floor. The record-high Chinese futures, which more closely track Middle Eastern grades like Oman and Murban trading above $120, illustrate the global tightness in the physical market. For North Dakota producers, the current price structure enhances cash flow for drilling completions, shareholder returns, and state tax revenues, though it also brings renewed attention to operational cost inflation and the high price of diesel for field operations.