Why Saudi Arabia’s East-West pipeline matters for global oil
The 1,200km (745-mile) pipeline has been temporarily closed, affecting up to 5 percent of global oil supply.
Oil prices experienced a significant surge on Monday, climbing more than three percent following additional strikes on Saudi Arabian energy infrastructure and attacks on ships in the Middle East, which heightened supply concerns. Brent crude futures jumped by US$3, or 2.9 percent, reaching US$107.61 a barrel, after briefly reaching a session high of US$108.65.
Meanwhile, WTI futures increased by US$2.48, or 2.5 percent, to US$102.53 per barrel. Last week saw oil prices rise by around nine percent as attacks in the Middle East intensified, with Brent crude breaching the US$100 mark for the first time since July, climbing to around US$110. This rally pushed US diesel prices above US$6 a gallon for the first time in three years, prompting US President Donald Trump to call on Ukraine to cease targeting Russian diesel infrastructure.
Saudi Arabia's East-West Pipeline was briefly halted following a drone attack, potentially curbing up to four percent of global oil supply and limiting Saudi Arabia's capability to circumvent the Strait of Hormuz and divert exports through the Bab el-Mandeb strait. The port of Yanbu in the Red Sea, currently holding inventory, can only supply exports for five to seven days.
Oil markets analyst Janiv Shah from Rystad noted that the relatively contained price reaction indicates the market is still confident in Saudi inventories to buffer exports in the short term, but if the disruption persists beyond the five-to-seven-day inventory buffer, it could escalate rapidly. Meanwhile, Iran-aligned Houthi rebels made progress toward the strategic island of Perim in Yemen, aiming to tighten their control over Bab el-Mandeb.
In the Strait of Hormuz, a vessel suffered a fire and had to evacuate its crew after being targeted by a projectile. Iran reported one fatality and four wounded crew members among an Iranian commercial ship struck off its coast. A scheduled meeting in Oman between Gulf nations and Iran to discuss the Strait of Hormuz was postponed by Oman's foreign minister, dampening hopes for improved shipping conditions.
Iran subsequently released a list of 77 ships allegedly violating its protocols for operating in the Hormuz Strait. While addressing the oil price surge and addressing the global refinery capacity issue remain challenging, PVM analyst John Evans highlighted Russian refinery outages and declining stockpiles as potential solutions.
Written by urgent.news from New Straits Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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