Brent Crude Surges to $110 as Saudi Pipeline Shutdown Deepens Supply Concerns

The Brent crude oil price surged to around $110 per barrel on Monday after Saudi Arabia's East-West pipeline was shut down due to drone strikes from Iraqi territory. The pipeline, which has a capacity of transporting up to 7 million barrels of crude per day, provides an alternative route for Saudi Arabia to export oil through the Red Sea.

The outage is expected to last for several weeks, with repairs potentially taking between three and five weeks. However, partial operations may resume earlier. This disruption has added to the already strained oil market, as tanker traffic through the Strait of Hormuz remains below normal levels due to the ongoing conflict with Iran.

Saudi Arabia's crude production has already declined sharply, falling by 1.9 million barrels per day in August to 6.238 million bpd, its lowest level since 1990. Additionally, demand-side pressures are contributing to the strain on the market, as China stepped up crude purchases in August and the US Strategic Petroleum Reserve is close to historically low levels.