Oil nears $108 after Saudi Arabia shuts pipeline amid attacks

Oil prices skyrocketed towards $108 per barrel on Monday following Saudi Arabia's decision to shut its East-West oil pipeline in response to attacks, eliminating a key route for exporting crude that bypasses the Strait of Hormuz and heightening concerns about a global supply crisis. Brent, the benchmark for roughly two-thirds of the world's oil, climbed as much as 3.7 percent before easing gains to finish 3.19 percent higher at $107.95 per barrel at 8:05 am UAE time.

West Texas Intermediate rose 3.14 percent to $103.19. Saudi Arabia's Energy Ministry announced late on Friday that it had suspended pipeline operations as a precaution following "multiple" attacks in Riyadh and Madinah regions on Thursday, resulting in several injuries. However, the ministry did not disclose details about any damage to the pipeline or when Saudi Arabia, Opec's leading oil producer, intends to resume crude flow through it.

The East-West pipeline is vital for connecting oil production sites in the Eastern Province with Yanbu on Saudi Arabia's western coast, with a full pumping capacity of approximately seven million barrels per day. This route has enabled the country to continue exporting oil through its Red Sea export hub, avoiding the US-Iran war-induced shipping chaos in the Strait of Hormuz.

Ahmad Assiri, research strategist at Pepperstone, noted that the pipeline's closure removed a substantial outlet for Gulf crude at a time when shipping through the Strait of Hormuz remains severely disrupted. He stated that the East-West pipeline reportedly supplied the world with six to seven million barrels per day pre-closure, accounting for 30 to 40 percent of crude supply from the Gulf.

While the market initially reacted positively, pushing oil prices above the $100 mark and reaching $110 intraday, Assiri warned that persistent pipeline disruption could force markets to reprice crude much higher, potentially reaching levels not seen since the beginning of the conflict.