Saudi Pipeline Restart Triggers Oil Price Drop Amid Regional Tensions

Saudi Arabia has signaled that it will reopen its East-West pipeline by the end of the week, leading to a drop in oil prices. The international benchmark, Brent crude, fell nearly 3% to $97.43 (€85.23) a barrel before rebounding to $99.64, down about 4% this week.

The pipeline's shutdown almost two weeks ago had caused oil prices to surge as high as $109.97 a barrel after drone strikes destroyed pumping stations and injured people. Saudi Arabia blamed the attacks on Iraqi militia. The East-West pipeline has enabled Saudi Arabia to keep exporting oil despite Iranian attacks on ships passing through the Strait of Hormuz.

An analyst at Sparta Commodities, June Goh, estimated that if only a quarter of the pipeline's capacity is restored, no extra oil would be exported, while 40% restoration could add one million barrels per day to global supplies. Oil from Yanbu travels mainly to European markets, and refineries in Europe were informed last week they would not receive allocated cargoes for October.