Crude oil prices surged on Sunday after Saudi Arabia shut down its East-West pipeline, a critical artery that bypasses the Strait of Hormuz, following drone damage earlier in the week.
U.S. West Texas Intermediate futures rose 3.46% to $103.51 per barrel by 4:56 a.m. ET, while Brent crude, the international benchmark, traded 3.51% higher at $108.28 per barrel.
Drones launched from Iraq damaged the pipeline on Thursday, prompting the Saudi government to close it. Riyadh has not disclosed the extent of the damage or how long the pipeline will remain out of service.
The pipeline can carry 7 million barrels per day and connects Saudi oil-producing regions near the Persian Gulf to export terminals on the Red Sea coast, spanning the kingdom from east to west. It has played a key role in easing the oil supply disruption triggered by the Iran war by allowing Saudi Arabia to shift crude exports away from the Gulf. Saudi Aramco CEO Amin Nasser said on the company's August earnings call that the pipeline has been more important in stabilizing oil markets than the large-scale release of strategic reserves led by the United States.
Regional security deteriorates
- A diplomatic meeting between Iran and Gulf Arab states, originally scheduled for Monday in Salalah, Oman, was postponed after the pipeline attack. Oman's Foreign Minister Badr Albusaidi said the postponement was "in the interests of consensus" and that the parties "remain committed to fostering dialogue that supports stability and lasting cooperation."
- Another tanker came under attack Sunday, resulting in a severe fire onboard, according to the United Kingdom Maritime Trade Operations Center.
- Houthi militants in Yemen struck energy facilities and civilian assets in Saudi Arabia early last week, injuring more than 70 people, according to Saudi state media.
- The Houthis have reportedly seized Perim Island in the Bab el-Mandeb Strait after taking the port city of Mokha on Yemen's western coast, strengthening their position to disrupt oil flows through the strait.
- The Houthis declared a maritime embargo of Saudi Arabia in July.
Source: CNBC
