Story
Oil Prices Rise as Saudi Pipeline Outage, Fresh Attacks Stoke Supply Fears
Summary
Oil benchmarks rose over 1% on Tuesday following new attacks on Saudi Arabian infrastructure and an ongoing outage of a key pipeline, heightening concerns over a potential disruption of up to 4% of global supply.
Oil prices climbed on Tuesday, with both major benchmarks rising over 1% amid escalating supply concerns in the Middle East. The rally follows fresh attacks on Saudi Arabian infrastructure and a critical outage of the kingdom's East-West pipeline, which has heightened fears of a significant disruption to global energy flows.
As of 0026 GMT, Brent crude futures were up 1.18% at $106.93 a barrel, while U.S. West Texas Intermediate (WTI) futures rose 1.24% to $102.65 a barrel, according to a Reuters report. The gains extend a rally from the previous session as the market prices in a higher geopolitical risk premium.
Geopolitical Tensions Escalate
Market anxiety intensified after Iran-backed Houthi forces in Yemen launched new missile and drone attacks on a military airbase in southern Saudi Arabia on Monday. This came just days after separate attacks on Friday, which Riyadh blamed on Iranian-backed fighters in Iraq, that disabled the country's strategic East-West pipeline.
Adding to the uncertainty, Gulf Arab states postponed planned diplomatic discussions with Iran. According to Tim Waterer, chief market analyst at KCM Trade, "Oil traders are treating every fresh attack or infrastructure hit as incremental supply risk."
Major Supply Artery at Risk
AdThe disabled East-West pipeline is a critical piece of infrastructure that allows Saudi Arabia, the world's largest oil exporter, to ship crude to its Red Sea port of Yanbu, bypassing the politically sensitive Strait of Hormuz. The potential impact on global markets is substantial:
- The pipeline has been used to reroute approximately 4 million barrels per day (bpd).
- This volume represents about 4% of total global oil supply.
Traders and buyers cited by Reuters expressed concern that Saudi Arabia could begin to exhaust oil available for export within days unless pipeline operations are restored. "The big question for traders right now is the duration of the East-West outage," Waterer noted. "Any prolonged disruption and the associated supply loss could easily push prices to the next level higher."
Shipping data also indicated that vessel traffic through the Strait of Hormuz, a chokepoint for about a fifth of global oil supplies, dropped to fewer than 10 transits per day over the weekend from a 10-day average of 14, according to the report.
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