Saudi Arabia has kept its East-West pipeline shut since late Friday, shutting off the 7 million barrel-per-day artery that carries crude from its Persian Gulf producing region to export terminals on the Red Sea, Nasdaq reported. Riyadh described the closure as a precaution following attacks by Houthi rebels and has given no indication of when the line will reopen.
October WTI crude rose 3.30 dollars, or 3.30%, on the session, reaching a 3.75-month high, and October RBOB gasoline climbed 0.0690 dollars, or 2.09%. Prices pulled back from their best levels after President Trump said Ukraine and Russia agreed not to attack each other’s energy targets.
Also read: Crude Falls 2.9% as IEA Warns of Biggest Oil Demand Drop Since Covid
Key facts
- The East-West pipeline carries 7 million bpd away from the Gulf and was shut late last Friday, with no reopening timetable disclosed.
- Saudi Arabia said Thursday its August crude production fell to 6.238 million bpd, the lowest since 1990; Bloomberg, Kpler and Vortexa data put its August crude exports near 3 million bpd, the lowest in nine years.
- CNBC reported WTI futures were up 2.3% at 102.38 dollars a barrel and Brent up 2.2% at 106.89 dollars, after a session high of 109.80 dollars, following a roughly 9% gain the prior week.
- Kpler’s Matt Smith, cited by CNBC, estimated a one-month closure would remove 120 million barrels of exports, assuming the line moves 4.5 million bpd of exports and 15 million barrels sit in storage at Yanbu.
- Houthi rebels captured the Red Sea port city of Mokha and, per CNBC, seized Perim Island in the Bab el-Mandeb Strait, after attacking energy facilities that injured more than 70 people, according to Saudi state media.
Two accounts of how the pipeline was hit
The two reports differ on the mechanism. Nasdaq said the line was closed as a precaution after Houthi attacks and that Saudi oil facilities were forced to halt production. CNBC said drones launched from Iraq damaged the pipeline on Thursday, that Riyadh has not disclosed how badly, and that the shutdown was forced by that damage.
Damage assessments carried by CNBC point to a prolonged outage. Rystad Energy analyst Janiv Shah said the contained price reaction suggested the market still expects Saudi inventories to cushion exports in the near term, but that this could change if the disruption runs past a five-to-seven-day inventory cushion. Andy Lipow, president of Lipow Oil Associates, said a pump station appeared to have taken serious damage and that Riyadh might be able to bypass the pump and restart at lower output, which he said explains why prices have not risen further. From online images, Lipow said repairs would take months.
Also read: Wheat Futures Slip Early Friday After Broad Thursday Rally
Supply losses beyond the Red Sea
Vitol Group said global markets keep tightening, with about 2 million bpd lost from Middle East crude exports and a further 2 million bpd from Russia because of Ukraine’s drone attacks. Russian crude-processing rates averaged 3.51 million bpd in July, the lowest in 24 years, according to EA Analytics, and OPEC secondary-source estimates put Russian July output at 8.89 million bpd, a six-year low. Reuters reported on August 28 that Russian gasoline production fell to about 80,000 tons a day in August, only 70% of domestic demand.
The IEA last Friday raised this year’s global oil deficit estimate to 1.7 million bpd from 1.3 million bpd and pushed its forecast return of a surplus to 2027, from late 2026, while warning that high prices and restricted supply will produce the biggest drop in global oil demand since the Covid-19 pandemic.
Why it matters
The pipeline has been Saudi Arabia’s main workaround since the Strait of Hormuz closed, so its loss compounds a supply squeeze on several fronts at once. Saudi Aramco CEO Amin Nasser said on the company’s August earnings call, per CNBC, that the line has done more to stabilize oil markets than the strategic reserve releases led by the United States.
The diplomatic track has also slipped. A meeting between Iran and Gulf Arab states on the situation in Hormuz, set for Monday in Oman, was postponed, with Oman’s Foreign Minister Badr Albusaidi saying the Salalah talks were delayed “in the interests of consensus.” The UK Maritime Trade Operations Centre reported another tanker attacked on Sunday with a severe fire aboard. For consumers, the pressure lands through gasoline, diesel and freight costs, and distillate inventories were already 14.0% below the five-year seasonal average as of September 4.
What to watch
The length of the outage is the pivot: Shah’s five-to-seven-day inventory cushion and Smith’s one-month, 120 million barrel calculation define how quickly the market tightens if Yanbu storage is drawn down. Also watch whether OPEC’s planned increases hold. Delegates on August 2 approved a final 188,000 bpd September increase, restoring all 1.65 million bpd of the 2023 cutback, though Nasdaq noted those gains may be hard to deliver during the US-Iran conflict.
Crude positioning is not a one-way bet. Vortexa reported crude stored on tankers stationary for at least seven days fell 23% week over week to 76.39 million barrels in the week ended September 11, the lowest in a year, while Baker Hughes said active US oil rigs rose by one to 450 in the week ended September 11, below the 1.25-year high of 455 set the week of August 14. US crude output rose 0.6% week over week to a record 13.947 million bpd in the week ending September 4.
None of this is financial advice; oil markets are volatile and prices can move sharply in either direction.
Reported by nasdaq.com.
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