Oil Prices Climb Above $108 After Saudi Pipeline Shutdown

Oil prices rebounded sharply, with Brent crude climbing back above $108 per barrel, after Saudi Arabia confirmed it shut down a major pipeline following an attack. The incident underscores the market's heightened sensitivity to geopolitical supply risks, reversing an earlier price dip driven by a weaker demand outlook and since-canceled diplomatic talks.

Pipeline Disruption Reverses Price Dip

Brent crude experienced significant volatility, initially falling toward $104 per barrel following reports of potential talks between Gulf Cooperation Council nations and Iran and a weaker demand forecast from the International Energy Agency, according to analysts at Citi.

However, prices reversed course after the proposed meeting was canceled and Saudi Arabia confirmed on Thursday that its critical East-West pipeline was attacked and subsequently taken offline. The disruption sent Brent back over $108 per barrel, while Dated Brent at one point surged above $130 per barrel.

Assessing the Supply Impact

The affected East-West pipeline is a crucial piece of energy infrastructure with a capacity of 7 million barrels per day (bpd). Before the incident, it was transporting approximately 5 million bpd, enabling about 4 million bpd of Saudi exports to bypass the Strait of Hormuz by shipping through the Red Sea.

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Despite the shutdown, Citi analysts noted that Saudi Arabia has substantial inventories to cushion the immediate impact. The bank estimates the kingdom holds around 14 million barrels at its west coast export terminals and an additional 12 million barrels at facilities in Sidi Kerir and Ain Sukhna. These stockpiles could allow Riyadh to meet near-term export commitments through stock draws, according to the bank.

Market Outlook Remains Firm

Analysts at Citi expect recent developments to support oil and petroleum product prices in the near term, especially given signs of resilient demand. Supportive market factors include an increase in Chinese crude imports, strong purchasing activity from refineries, and an expected light upcoming maintenance season.

Looking ahead, Citi anticipates these factors will underpin prices before a potential reopening of the Strait of Hormuz, which could emerge as a key market theme during the fourth quarter of 2026.