Oil surges past $108 as Saudi pipeline remains offline

Oil prices climbed on Tuesday as attacks on Saudi Arabian energy infrastructure kept the kingdom's East-West crude pipeline offline, deepening concerns that a prolonged outage could remove up to 4% of global oil supply. Brent crude hit a session high of $108.43 a barrel before pulling back, while U.S. West Texas Intermediate rose above $104 earlier in the session, according to Reuters.reuters

The 1,200-kilometer pipeline, which connects processing facilities near the Persian Gulf to the Red Sea port of Yanbu, was shut down on September 10 as a precaution after strikes that Riyadh blamed on Iranian-backed fighters in Iraq. With the Strait of Hormuz already severely disrupted since the U.S.-Israeli war on Iran began in late February, the pipeline had become a critical alternative export route, carrying roughly 4 to 5 million barrels per day to the Red Sea in recent months.investinglive+2

Repair Timeline Uncertain

Estimates for when the pipeline will resume vary widely. Goldman Sachs ↘ 0.10% said in a note that repair assessments range from "very soon" to eight weeks. U.S. Energy Secretary Chris Wright said Monday he expects the pipeline to be back in service "very soon," while the Associated Press, citing regional officials, reported it could remain offline for several weeks. Saudi Aramco has not commented on the timeline.news.futunn+1

Suvro Sarkar, head of energy research at DBS Bank, said Yanbu's inventories can sustain exports for five to seven days, but a prolonged outage would deliver a "significant shock". Goldman Sachs warned the attacks increased the probability of Brent rising above $120 a barrel.reuters+1

Escalation Compounds Disruption

Iran-backed Houthi forces in Yemen launched fresh strikes on Monday, firing dozens of missiles and drones at a military air base in Khamis Mushait in southern Saudi Arabia. Commodity vessel traffic through the Strait of Hormuz dropped to just four ships on Monday, down from 10 a day earlier, according to preliminary data from Kpler. Talks between Iran and Gulf states on reopening the strait were postponed over the weekend, with Oman offering no new date.investing+1

The ripple effects are spreading. Indian refiners face higher import costs as Saudi Arabia accounts for 7 to 8 percent of India's crude imports, with large volumes routed through Yanbu. Separately, Reuters reported that Abu Dhabi National Oil Co. has purchased millions of barrels of discounted Iraqi crude — 32 million barrels in August and a further 40 million in September — as it expands its trading operations amid wartime supply disruptions.reuters+3

"In the absence of an adjustment in demand or greater oil flows through the Strait of Hormuz, several weeks of the East-West Pipeline being closed could lift Brent crude prices towards $130 per barrel," said Hamad Hussain, senior climate and commodities economist at Capital Economics.reuters