Saudi Pipeline Shutdown Deepens Global Oil Supply Concerns
Saudi Arabia’s East-West oil pipeline remains shut after drone strikes raise concerns over global energy supplies.
Middle East diplomacy appeared to lose momentum as a planned meeting between Iran and Persian Gulf states was postponed. At the same time, fresh attacks near the region’s key oil routes increased concerns about global energy supplies.
Oil prices rose when markets reopened on Monday. Meanwhile, Saudi Arabia kept its 1,200-kilometre East-West oil pipeline closed after drone strikes damaged the route on Friday.
The pipeline provides Saudi Arabia with a key route to move oil to the Red Sea without using the Strait of Hormuz. As a result, the shutdown has raised concerns about further pressure on global oil supplies.
Iran-Gulf Meeting Postponed
Oman’s Foreign Minister Sayyid Badr Albusaidi said late Sunday that a regional meeting scheduled for Monday had been postponed. According to him, the decision was made in the interest of consensus.
Iranian officials had planned to attend the meeting with Gulf Arab states. Furthermore, Tehran intended to present an agreement with Oman concerning shipping routes through the Strait of Hormuz.
Iran’s Fars news agency quoted an Iranian Foreign Ministry official as saying some regional countries requested the postponement. The official added that Tehran and Muscat would coordinate on a new date.
The delay came as diplomatic efforts faced growing pressure from renewed attacks across the region.
Strait of Hormuz Remains a Major Risk
The Strait of Hormuz continued to pose risks for international shipping. On Sunday, the British maritime security agency UKMTO said a vessel was hit by a projectile while travelling through the strait.
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The attack caused a fire and forced the crew to evacuate. Separately, Iran said one person died and four crew members were injured after an Iranian commercial vessel was struck off its coast.
Meanwhile, uncertainty around the strait has continued to affect oil markets. The waterway remains a crucial route for global energy shipments.
Saudi Pipeline Faces Extended Shutdown
Saudi Arabia has not provided a detailed assessment of the damage to its East-West pipeline. However, sources cited by Reuters gave varying estimates for repairs, ranging from several days to several weeks.
Satellite images have shown large columns of smoke from locations along the pipeline. Consequently, traders have focused closely on Saudi Arabia’s available oil stocks.
Saudi oil buyers and traders said Riyadh could maintain exports for only five to seven days from stocks at the Red Sea port of Yanbu if the pipeline remains closed.
After that, up to 4% of global oil supply could face disruption. This would add to the supply losses caused by reduced traffic through the Strait of Hormuz.
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Oil prices moved above $100 a barrel last week for the first time since July. In addition, the US retail diesel price climbed above $6.20 a gallon on Sunday, reaching another record.
The disruption has added to concerns about inflation and fuel costs. At the same time, traders are monitoring the impact on crude supplies and shipping routes.
Saudi Arabia used the East-West pipeline to redirect about 4 million barrels of oil per day to Yanbu. That volume represents roughly 4% of global oil supply.
However, the pipeline shutdown has limited that option. Industry sources said Yanbu has enough stocks to support exports for only several days.
Saudi Arabia also holds stocks at Egypt’s Ain Sukhna and Sidi Kerir ports. Nevertheless, those reserves will eventually run down if the pipeline does not resume operations.
Houthi Attacks Add to Regional Risks
The security situation has also deteriorated around the Red Sea. In Saudi Arabia, state media released footage showing damage to homes and a mosque in Jazan province following a reported cross-border Houthi attack.
The Houthis separately claimed an attack on a Saudi military base. The claims followed their reported capture of Perim Island near the Bab el-Mandeb Strait.
The Houthi advance along Yemen’s Red Sea coast has created another challenge for regional security. Moreover, attacks on Saudi Arabia have complicated Washington’s position.
The United States wants to protect Saudi Arabia and international shipping. However, Washington also faces concerns about opening another military front.
Three sources told Reuters that Saudi Crown Prince Mohammed bin Salman called US President Donald Trump on Thursday to request military assistance against the Houthis. For now, the United States has offered intelligence support, according to the sources.
Trump later confirmed that he had spoken with the crown prince. He also said the Houthis had contacted Washington and asked the United States to stay out of the Yemen conflict.
Iran and UAE Seek Stronger Ties
Despite the regional tensions, Iran and the United Arab Emirates have signalled a desire to improve relations.
Iranian President Masoud Pezeshkian said Sunday that Tehran and Abu Dhabi had agreed to strengthen bilateral ties and expand cooperation. He made the remarks after meeting Abu Dhabi Crown Prince Khaled bin Mohamed bin Zayed Al Nahyan in New Delhi during the BRICS Summit.
According to Pezeshkian, both sides agreed to move beyond past differences and focus on future cooperation.
The leaders also discussed regional developments. In addition, they explored ways to reduce tensions and promote greater stability.
Global Oil Supply Faces Growing Pressure
The International Energy Agency said Saudi oil supply had already fallen to a more than three-decade low in August. Meanwhile, global supply faces further pressure from disruptions around Hormuz and the Red Sea.
The IEA expects world oil supply to decline by about 5.7 million barrels per day this year, or roughly 6%.
Before the current conflict, the Middle East supplied around 22 million barrels of oil per day. However, flows through the Strait of Hormuz have now fallen sharply, according to industry sources.
Saudi Arabia also told OPEC that its oil production fell to around 6.2 million barrels per day in August. That compares with 10.9 million barrels per day in February, before the war began.
Overall, the combination of the Saudi pipeline shutdown, continued shipping risks and Houthi attacks has increased uncertainty across global energy markets. The duration of the pipeline outage and the future of regional diplomacy will remain key factors for oil prices in the coming days.
