Saudi Pipeline Shutdown Threatens Global Oil Supply Amid Record Prices

A major pipeline in Saudi Arabia has been shut down after drone strikes from Iraq, leaving the kingdom at risk of running out of exportable oil stocks within days. The East-West cross-country pipeline, which carries oil to the Red Sea port of Yanbu, was hit on September 11.

The disruption could eliminate as much as 4% of the world's oil supply, exacerbating an already severe global supply shortage that has driven fuel prices to record highs and fueled inflation worldwide. Saudi Arabia had been rerouting about 4 million barrels per day through the pipeline to avoid the effects of the wartime closure of the Strait of Hormuz.

The pipeline's shutdown has left Yanbu's remaining reserves, estimated at around 35 million barrels, able to sustain exports for only five to seven more days. Saudi oil output had already dropped to its lowest level in over three decades in August, driven by reduced flows through both Hormuz and the Red Sea.

The International Energy Agency (IEA) has projected that global oil supply will fall by 5.7 million barrels per day this year, a 6% decline. The crisis is further compounded by Houthi forces in Yemen seizing an island near the entrance to the Red Sea.