Oil prices have risen significantly after Saudi Arabia announced the closure of its East-West crude pipeline. This pipeline is a critical alternative for Saudi oil exports, bypassing the Strait of Hormuz, and its shutdown follows multiple attacks on Thursday. This development has further tightened global oil and fuel markets, which are already experiencing disruptions from various ongoing conflicts.
The pipeline outage threatens a potential loss of up to 4% of global oil supply if it is not restarted within days, according to Reuters. Saudi Arabia reportedly has oil stocks in ports sufficient for $5-7 days to maintain exports, but a prolonged closure would necessitate a major drop in exports. The duration of repairs has not been disclosed by Saudi Arabia, leading to increased uncertainty in the market.
Asian oil refiners, in particular, are awaiting updates regarding cargo pickups at Saudi Arabia's Red Sea port of Yanbu, which is served by the now-closed pipeline. A planned meeting between Iran and several Gulf nations to discuss a temporary shipping lane through Hormuz has also been postponed, as confirmed by Oman's foreign minister, adding to the geopolitical complexities impacting oil transport. The US Energy Chief, however, has expressed optimism that the pipeline could be back online "soon."
