Oil Surges as Saudi Pipeline Shutdown Brings Fresh Supply Risk
Oil surged as Saudi Arabia’s closure of a major crude pipeline following attacks jolted the market, with the move disrupting a route that’s been key to bypassing the Strait of Hormuz during the US-Iran war. Bloomberg's Rob Barnett joins to discuss. (Source: Bloomberg)
Oil prices climbed on Tuesday (Sep 15) as traders expressed concerns over potential supply disruptions stemming from recent attacks on Saudi Arabian energy infrastructure. The East-West pipeline, a key conduit for about 4% of global oil supply, was rendered offline following assaults by Iran-backed Houthi forces in Yemen. This incident, compounded by fresh Houthi attacks on Sep 11, raised doubts about efforts to alleviate shipping risks in the Gulf.
Brent crude futures climbed US$1.37, or 1.3%, to US$107.05 a barrel, while US West Texas Intermediate futures rose US$1.53, or 1.51%, to US$102.92 a barrel. Both benchmarks had increased by more than 1% in the preceding session. The Houthi missile and drone attack on the Khamis Mushait military airbase in southern Saudi Arabia, which targeted aircraft hangars, radar systems, runways, and ammunition depots, was a retaliatory response to Saudi strikes in Yemen.
The disruption to the East-West pipeline raises concerns about a potential widening of the Middle East conflict, which could further strain global oil supplies. "Oil traders are treating every fresh attack or infrastructure hit as incremental supply risk," stated Tim Waterer, chief market analyst at KCM Trade. The outage could force Saudi Arabia to exhaust its exportable oil within days, potentially removing up to 4% of global oil supply from the market.
ING analysts emphasized the lingering uncertainty surrounding the extent of damage and the duration of the outage for the East-West pipeline. They noted that prices are likely to remain well supported until clarity emerges. Meanwhile, President Volodymyr Zelensky of Ukraine expressed readiness to support a US proposal for a Russia-Ukraine ceasefire on energy sites, provided Washington could ensure Russia's genuine commitment to ending its war on Ukraine.
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- Oil climbs as Saudi pipeline outage, fresh Houthi attacks stoke supply fears businesstimes.com.sg
