Saudi Arabia is racing against time to repair a crucial pipeline that has been shut down following drone attacks, threatening to push oil prices above $100 per barrel. The East-West pipeline, which transports crude oil from Abqaiq to the port of Yanbu, has been closed, putting 4 million barrels per day at risk.
The closure comes amid rising tensions in the Middle East, with renewed hostilities between the U. S. and Iran and a surge in attacks by Iran-backed Houthis along the Red Sea coast. Analysts warn that the longer the pipeline remains offline, the more likely it is that oil prices will spike significantly.
Janiv Shah, vice president of oil markets for Rystad Energy, noted that the broader Middle East conflict is already adding a premium to crude prices. "The relatively contained price reaction suggests the market still expects Saudi inventories to cushion exports in the near term, but if the disruption extends beyond the five-to-seven-day inventory cushion, that could change quickly, " Shah said in a research note.
Brent crude futures for November rose 0.6% to $106.29 per barrel on Tuesday, while U. S. West Texas Intermediate futures for October increased by 1.2% to $102.61. Both benchmarks have seen significant gains over the past month, with Brent up more than 21% and WTI over 25%.
The Saudi government temporarily closed the East-West pipeline on Friday as a precaution after drone strikes targeted a key stretch in the Riyadh and Medina regions. Several people were injured in the attacks, which have further complicated the region's already tense geopolitical landscape.
The East-West pipeline, approximately 750 miles long, has a design capacity of 7 million barrels per day. It serves as a vital alternative to the Strait of Hormuz, a strategic chokepoint for global oil shipments that has been increasingly threatened by regional conflict.
Historically, global inventories have acted as a buffer to stabilize oil prices during crises. However, these safety nets are rapidly depleting. Analysts have raised alarms that inventories have already been drawn down by around 1 billion barrels, with another billion potentially at risk.
Satellite images of the pipeline damage suggest that repairs could take months, president of Lipow Oil Associates. Riyadh has not yet disclosed the number of affected pumping stations or provided a timeline for repairs.
The damage to the pipeline underscores the growing impact of regional conflicts on oil exports. Attacks on energy infrastructure and tankers are not only constraining oil exports but also delaying the import of parts needed for repairs, according to Verisk Maplecroft's principal Middle East analyst.
The East-West pipeline's closure has removed an export route carrying over 4 million barrels per day, which will now need to be rerouted through the Strait of Hormuz. However, daily volumes through the strait are volatile and typically average only half of their pre-conflict levels.
In the past, Saudi Arabia has managed to restart the East-West pipeline within days after similar attacks. However, the current damage appears more severe, according to analysts.
James, an analyst at Oxford Analytica, noted that the entire Red Sea route might come under threat due to Iranian pressure to halt oil exports from the region. He added that Gulf countries are increasingly mobilizing to address the issue, with a postponed meeting between Oman and Iran suggesting more serious preparations are underway.
