Oil nears $108 after Saudi Arabia shuts pipeline amid attacks

Oil prices skyrocketed towards $108 per barrel on Monday following Saudi Arabia's shutdown of its East-West pipeline, a crucial route for exporting crude oil without transiting through the Strait of Hormuz, exacerbating concerns over a global supply shortage. Brent, the benchmark for roughly two-thirds of the world's oil, surged up to 3.7 percent before moderating to a 3.19 percent increase, trading at $107.95 per barrel by 8:05am UAE time.

West Texas Intermediate climbed 3.14 percent to $103.19. Saudi Arabia's Energy Ministry announced on Friday that it had suspended operations on the pipeline as a precaution following "multiple" attacks in Riyadh and Madinah regions on Thursday, resulting in several injuries. The ministry did not disclose details about any damage to the pipeline or a timeline for resuming oil flow.

The East-West pipeline, which connects oil production sites in Saudi Arabia's Eastern Province to Yanbu on the country's western coast, is vital for transferring crude oil and has a full pumping capacity of approximately seven million barrels per day. Its closure eliminated a key outlet for Gulf crude at a time when shipping through the Strait of Hormuz is severely disrupted due to ongoing tensions between the U.S. and Iran.

Ahmad Assiri, research strategist at Pepperstone, noted that the East-West pipeline typically supplied the world with six to seven million barrels per day, representing 30 to 40 percent of crude supply from the Gulf. "Market reaction was evident, pushing oil prices above the $100 mark and reaching $110 intraday," he said. "If this significant pipeline disruption persists, markets will be compelled to reprice crude much higher, potentially reaching levels we've seen since the start of the conflict," Assiri added.

Recent tensions suggest that the oil supply shortage may no longer be manageable through temporary measures, necessitating a resolution to the Hormuz disruption.