Saudi Pipeline Shutdown Threatens Global Oil Supplies

The shutdown of Saudi Arabia's East-West Pipeline has caused widespread concern in the global oil market. The pipeline, which transports crude across Saudi Arabia to the Red Sea port of Yanbu, was closed as a precaution after being attacked by Iraqi militants.

The pipeline is a critical bypass route around the Strait of Hormuz and its closure has removed approximately 4% of global supply from the market. According to Victoria Silva, senior research associate at RBC Capital Markets, the shutdown could last for three to five weeks while repairs are made.

Despite some stored crude being available, experts believe that these reserves will be depleted within five to seven days, putting up to 4% of global supply at risk. Giovanni Staunovo, commodity analyst at UBS, noted that 'because this pipeline serves as a critical bypass around the strait, its closure is further tightening the global oil market.'

The impact on global supply has been compounded by attacks on tankers passing through Bab el-Mandeb, which have reduced shipments through this route to 870,000 barrels per day. This has left Saudi exports facing higher freight costs and longer delivery times.