Saudi Pipeline Shutdown Sends Global Oil Prices Soaring to 3.75-Month High

Crude oil prices surged to a three-and-a-half-month high as Saudi Arabia shut down its East-West pipeline following attacks by Houthi rebels. The move has disrupted a key route that bypasses the Strait of Hormuz, further tightening global oil supplies.

Saudi Arabia's August crude production fell to 6.238 million bpd, the lowest since 1990, after the country pivoted to the Red Sea to export most of its oil following the closure of the Strait of Hormuz. However, escalating tensions with the Houthis have disrupted that route as well.

The loss of about 2 million bpd from crude exports in the Middle East and a further 2 million bpd from Russia due to Ukraine's drone attacks has also contributed to the tightening global oil supplies. Vitol Group said global oil markets are continuing to tighten, with data compiled by Bloomberg, Kpler, and Vortexa showing that Saudi Arabia's August crude exports dropped to about 3 million bpd, the lowest in nine years.

Meanwhile, Israel could be dragged back into the US-Iran conflict, with Israeli Defense Minister Katz stating that an Iranian attack on Israel would free Israel from any existing restrictions in a response against the regime in Iran. The International Energy Agency (IEA) warned that high oil prices and restricted oil supply will cause the biggest drop in global oil demand this year since the Covid-19 pandemic.