Oil Prices Skyrocket as Saudi Pipeline Closure and Hormuz Blockade Combine

The global oil supply system is facing unprecedented strain due to the convergence of three pressures. The blockage of the Strait of Hormuz, disruption of Red Sea shipping, and the closure of Saudi Arabia's East-West Pipeline have severely impacted the market.

Saudi Arabia's East-West Pipeline was damaged in a drone attack last Thursday, prompting Riyadh to shut it down immediately. The pipeline has been a critical artery for maintaining Saudi oil exports while bypassing the Strait of Hormuz since the outbreak of war with Iran.

The International Energy Agency (IEA) showed that Saudi oil supplies fell to their lowest level in over three decades in August due to disruptions in the Strait of Hormuz and Red Sea routes. The IEA also projected that global oil supply would decrease by approximately 5.7 million barrels per day this year, representing a decline of about 6%.

Bernstein analysts Neil Beveridge and Brian Ho warned that Brent crude prices could surge further from current levels to reach $120, $150 per barrel due to the combined transit volume through the Strait of Hormuz, the Bab el-Mandeb Strait, and the Suez Canal falling below 7 million barrels per day.