Saudi Oil Pipeline Damaged in Drone Attack, Global Market Sentiment Sours

A key Saudi oil pipeline was damaged in a drone attack, leaving its future uncertain and sending shockwaves through the global commodity sector. The East-West crude oil pipeline has a peak design capacity of around 7 million barrels per day (bpd) of crude oil, or roughly 35% of what normally flows through the Strait of Hormuz.

The pipeline was targeted by multiple drones fired by Iranian-backed militias in Iraq last week, despite initial claims from the Saudi Energy Ministry that it was closed only as a precaution. The Associated Press reported on Monday that repairs could take up to five weeks to complete, although the pipeline might still be able to run at a limited capacity.

The incident highlights the growing risk for regional producers, with ongoing tensions in the Persian Gulf and the Iranian-backed Houthi rebel group in control of the southern mouth of the Red Sea. This has led to concerns that crude oil is essentially 'locked in', unable to be easily transported or sold on international markets.