Oil above $109: attack on Saudi pipeline threatens export routes

Oil prices rose on Monday after Saudi Arabia shut down the key East-West pipeline following drone attacks, while Yemen’s Houthi rebels tighten their control over the Bab el-Mandeb strait — adding pressure on Middle East oil export routes, already strained by the US-Iran conflict.

Brent crude for near-term delivery rose 4.3% to $109.14 per barrel, while U.S. West Texas Intermediate rose 4.4% to $104.46 per barrel. Both ended last week with strong gains — Brent gained 8.7% and WTI 9.4%.

Saudi Arabia’s East-West pipeline remains shut after multiple drone attacks last week. The pipeline carries oil from the kingdom’s productive east toward the Red Sea coast and is the main alternative export route, while maritime traffic through the Strait of Hormuz remains limited.

The attack adds pressure on a vital energy corridor. The Iranian-backed Houthi rebels seized Perim Island and the coastal city of Dhubab last week, following the capture of the strategic port city of Mokha — tightening their control over the Bab el-Mandeb strait and increasing the risks around oil shipments in the Red Sea.

According to Capital Economics, the pipeline shutdown could affect up to 4% of global oil supply, with about 3 million barrels a day exported from the Yanbu port before the shutdown. The firm kept its forecast that Brent will close the year at $100, but said risks are now “clearly rising”, especially if repairs drag on or attacks on regional energy infrastructure intensify.

According to S&P Global Commodity Insights, oil flows through Bab el-Mandeb fell to 1.5 million barrels a day in August, from 3.14 million in July. Rystad Energy warns that a one-month disruption in Yanbu would leave 78 to 120 million barrels out of the export market, while a two-month disruption would significantly tighten tanker availability and create shortages even if oil were sufficient globally.

The International Energy Agency (IEA) said Friday that the US-Iran diplomatic deadlock and renewed attacks in the Persian Gulf have pushed back the outlook for normalized oil flows next year. The agency now expects global oil supply to fall by 5.7 million barrels a day this year, with a full recovery of Middle East supplies pushed to 2027.

Source: Wall Street Journal