Saudi Arabia's Pipeline Crisis Threatens Oil Price Rally

Saudi Arabia's East-West pipeline, which circumvents the Strait of Hormuz, is pumping oil at its full capacity of 7 million barrels a day. This crucial pipeline transports crude oil from Abqaiq on the kingdom's eastern Gulf coast to the port of Yanbu on the Red Sea.

The closure of this pipeline has put more than 4 million barrels a day of crude export capacity at risk, forcing additional volumes toward the Strait of Hormuz. Analysts warn that oil prices could rally sharply if the pipeline remains offline beyond an estimated five-to-seven-day inventory cushion.

Global oil inventories have already fallen by around 1 billion barrels, leaving the market with less room to absorb further disruptions from the Middle East conflict. Prices are unlikely to fall below $100 per barrel anytime soon, analysts said, with traders increasingly pricing in a significant loss of regional supply as Saudi Arabia scrambles to restore the pipeline.