The closure of Saudi Arabia's East-West pipeline due to recent attacks has led to an increase in oil prices to nearly $108 per barrel. This pipeline is one of the vital routes for crude oil exports that allows bypassing the Strait of Hormuz. Brent oil prices, which represent two-thirds of the world's oil, increased by 3.7% to reach $107.95 per barrel.
Details of the Pipeline Closure
The Saudi Ministry of Energy announced that this action was taken as a precaution due to multiple attacks in the Riyadh and Medina regions on Thursday, which resulted in several injuries. No further information has been provided regarding potential damages to the pipeline or the timeline for resuming operations. The East-West pipeline, which has a daily pumping capacity of about seven million barrels, plays a key role in connecting oil production sites in Eastern Saudi Arabia with Yanbu on the country's western coast.
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Impact on the Global Oil Market
The closure of this pipeline eliminates a crucial outlet for Gulf crude oil at a time when traffic in the Strait of Hormuz has been severely disrupted. Ahmad Asiri, a research strategist at Pepperstone, noted that prior to the closure, the East-West pipeline supplied between 6 to 7 million barrels of oil to the global market daily, which accounts for 30 to 40 percent of Gulf crude oil supply. The market's reaction to this news has pushed oil prices above $100, with some forecasts suggesting it could reach $110 during the day.
Asiri also added that if this disruption in the pipeline continues, markets will be forced to raise oil prices to higher levels. He emphasized that recent tensions indicate that oil supply shortages cannot be managed with temporary measures and require a real solution for disruptions in the Strait of Hormuz.
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