This considerably raises the stakes for oil versus the weekend’s initial framing of the Hormuz meeting postponement, since the pipeline closure removes a genuine safety valve rather than just delaying a diplomatic step.
We gave the heads up to this attack a day or so before major news wires, had our ears to the ground we did:
- Vessels hit near Hormuz as satellite images fuel Saudi pipeline attack claims
- Brent oil surging. Houthi attack on Saudi East-West pipeline the likely culprit
- Unverified satellite data fuels talk of fresh hit on Saudi Arabia’s East-West pipeline
The East-West pipeline has been central to Saudi Arabia’s ability to route crude away from Gulf chokepoints during the Iran war, with Aramco’s own chief executive describing it as more important to market stability than the coordinated strategic reserve releases led by the United States. Its closure, combined with a fresh tanker attack in Hormuz producing a severe onboard fire and reports of Houthi forces advancing toward the Bab el-Mandeb Strait, points to supply risk building on multiple fronts simultaneously rather than easing. Expect this to reinforce the bid already seen in crude at the Globex open, with the risk skewed toward further upside pressure unless Riyadh moves quickly to clarify the extent of the pipeline damage and a realistic repair timeline.
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A drone strike on Saudi Arabia’s key East-West pipeline has knocked out a critical release valve for oil supply just as Hormuz diplomacy stalls and Houthi advances threaten a second chokepoint.
Summary:
- Drones launched from Iraq damaged Saudi Arabia’s East-West pipeline on Thursday, forcing Riyadh to close it, with the extent of damage and expected closure duration not disclosed.
- The pipeline can carry 7 million barrels per day and connects Saudi oil producing regions near the Persian Gulf to Red Sea export terminals, and has been central to easing supply disruption from the Iran war.
- Oman’s foreign minister, Badr Albusaidi, said the Iran and Gulf Arab states meeting on Hormuz, originally set for Monday in Salalah, was postponed “in the interests of consensus,” with this report tying the postponement directly to the pipeline attack.
- A tanker came under attack in Hormuz on Sunday, causing a severe onboard fire, according to the UK Maritime Trade Operations Centre.
- Saudi Arabia has faced escalating attacks from Iran-allied groups, including a Houthi strike on energy facilities and civilian assets that injured more than 70 people.
- Houthi forces have reportedly seized Perim Island in the Bab el-Mandeb Strait after taking the port city of Mokha, strengthening their position to threaten oil flows through that separate chokepoint.
- Aramco chief executive Amin Nasser said on the company’s August earnings call that the pipeline has played a more important role in stabilising oil markets than the coordinated strategic reserve release led by the United States.
Saudi Arabia has shut its East-West pipeline after drones launched from Iraq damaged the key crude artery on Thursday, removing one of the kingdom’s primary tools for routing oil supply around the disrupted Strait of Hormuz. Riyadh has not disclosed the extent of the damage or how long the pipeline will remain closed.
The closure appears to have directly upended regional diplomacy over Hormuz. A meeting between Iran and Gulf Arab states, originally scheduled for Monday in Salalah, Oman, to discuss the situation in the strait, was abruptly postponed following the attack. “In the interests of consensus the regional meeting set for tomorrow in Salalah has been postponed,” Oman’s foreign minister, Badr Albusaidi, said in a social media post on Sunday, adding that Oman remains committed to dialogue supporting regional stability. That account ties the postponement more directly to the pipeline strike than earlier reporting had suggested, which had characterised the delay as a joint decision by Tehran and Muscat at the request of unnamed regional countries.
The security picture across the wider region has continued to deteriorate. A tanker came under attack in Hormuz on Sunday, resulting in a severe fire onboard, according to the United Kingdom Maritime Trade Operations Centre. Saudi Arabia has also faced a string of attacks from Iran-allied militant groups in recent days, including a Houthi strike on energy facilities and other civilian sites early last week that injured more than 70 people, according to Saudi state media.
The East-West pipeline itself carries up to 7 million barrels per day and runs from Saudi Arabia’s oil producing regions near the Persian Gulf to export terminals on its Red Sea coast, giving Riyadh a route to keep crude flowing even as Iran and the United States contest control of the Strait of Hormuz. Aramco chief executive Amin Nasser told the company’s August earnings call that the pipeline has played a more significant role in stabilising oil markets during the conflict than the coordinated strategic petroleum reserve releases led by the United States, underlining how central the artery has become to the kingdom’s export strategy.
Adding to the pressure, Houthi militants in Yemen have reportedly seized the strategic Perim Island in the Bab el-Mandeb Strait after taking the port city of Mokha on Yemen’s western coast. The advance would give the group a stronger position from which to threaten oil flows through Bab el-Mandeb, a separate but critical chokepoint connecting the southern Red Sea to global shipping routes, raising the prospect of supply risk building on two fronts at once rather than being contained to Hormuz alone.
This article was written by Eamonn Sheridan at investinglive.com.