Global crude oil prices rose to over $107 per barrel following Saudi Arabia’s precautionary shutdown of its East-West pipeline after an attack. Brent crude increased by 2.9 percent to trade at $107.64 per barrel at 07:56 AM in Singapore, while West Texas Intermediate gained 2.5 percent to $102.56 per barrel. Crude oil prices have surged by more than 75 percent over the year amid widening geopolitical frictions.
Pipeline transit and storage limits
Saudi Arabia suspended operations along the conduit as a precaution after the strike occurred. The East-West pipeline is typically used to bypass the Strait of Hormuz amid the conflict between the United States and Iran, offering an alternative route across the peninsula to the Red Sea terminal at Yanbu.
“In Saudi Arabia, storage capacity at Yanbu can support exports for five to seven days,” said Suvro Sarkar, head of energy research at DBS Bank Ltd. Sarkar added that “beyond that will create very major disruptions.” June Goh, senior oil market analyst at Sparta Commodities SA, noted that “everything depends on how long this shutdown lasts.”
Regional tensions and macro headwinds
Iraqi Prime Minister Ali Al-Zaidi ordered an investigation after finding the attack originated from an area bordering Iran. Meanwhile, authorities postponed a planned meeting between Iran and several Persian Gulf states to discuss a temporary shipping corridor through Hormuz.
Hormuz transit talks stalled. Energy markets face additional macro pressure as the Federal Reserve is widely expected to raise interest rates following August US inflation data.
Related: Saudi Arabia halts East-West pipeline after drone strikes · Gulf transit talks stall as Saudi pipeline stays shut
Source: Saudi Arabia
