Saudi Pipeline Restart Sends Oil Prices Plummeting

Saudi Arabia's East-West Pipeline has resumed operations after being shut down due to drone attacks from Iraqi territory. The pipeline, which runs 1,200 kilometers across Saudi Arabia from Abqaiq to Yanbu on the Red Sea, is a crucial alternative route for crude exports. According to Reuters, the system was pumping at a low rate before restarting, and it's expected that crude exports from Yanbu could resume later Tuesday.

The East-West Pipeline has a nameplate capacity of 5 million barrels per day, although Saudi Arabia temporarily expanded this to 7 million barrels per day in 2019. The pipeline is strategically important as it allows Saudi Arabia to move crude to the Red Sea without sending those barrels through the Strait of Hormuz. This gives the kingdom another export option when shipping conditions around the Persian Gulf deteriorate.

Following the restart, Brent crude futures for November fell more than 2% to around $98 per barrel, while U.S. benchmark West Texas Intermediate also fell to around $90 per barrel. This is a significant drop from the previous disruptions, which saw physical crude prices in Europe climb above $130 per barrel as buyers competed for replacement cargoes.