Saudi Pipeline Shutdown Threatens Global Oil Supply Amid Strait of Hormuz Tensions

Saudi Arabia's East-West oil pipeline has been shut down due to drone attacks, threatening a crucial backup route for exporting crude oil. The pipeline, which had been carrying approximately 4-5 million barrels per day, is now offline, putting pressure on the already strained Strait of Hormuz.

The shutdown comes as Brent crude prices settle at $104.61 a barrel, while WTI closed at $100.05, both still up over 8% from Friday's pullback. The East-West pipeline had become increasingly important for Saudi Arabia as it allows crude oil to reach the Red Sea port of Yanbu without passing through Hormuz.

Industry estimates suggest that storage at Yanbu could sustain exports for only about five to seven days if the pipeline remains offline, significantly changing the oil market risk. Earlier this year, improving Gulf shipments through Hormuz had given traders some confidence that exports could normalize, but now both sides of Saudi Arabia's export system are exposed.

The International Energy Agency (IEA) estimates that global production could fall by roughly 5.7 million barrels per day this year, while Saudi output has already dropped dramatically from earlier levels. This imbalance helps explain why Brent remains above $100 even with weaker demand.