Oil rises as Saudi pipeline outage and Houthi gains pressure Middle East supply

Dhar says crude inventories may provide only weeks of cover

Oil prices climbed Tuesday as the shutdown of Saudi Arabia’s East-West Pipeline and Houthi advances in Yemen compounded Middle East supply concerns at a moment when analysts say the cushioning factors that have absorbed prior disruptions are starting to weaken.

Brent crude futures rose 1.8% to $107.59 a barrel in early European trading, while West Texas Intermediate gained 1.9% to $103.30, according to The Wall Street Journal. Both benchmarks remained below their Monday intraday peaks, when Brent briefly touched $109.80 and WTI reached $104.35. Brent ultimately settled Monday at $105.68, while WTI settled at $101.39.

Saudi Arabia is working to restore partial operations on the East-West Pipeline within days, the Journal reported, though damaged pumping stations could take six to eight weeks to fully repair. The 750-mile pipeline can carry as much as 7 million barrels a day from Saudi Arabia’s oil-producing region in the east to the Red Sea port of Yanbu, a route that allows crude exports to bypass the Strait of Hormuz.

The outage comes as the Houthis strengthen their position around another key oil-shipping chokepoint. The militants seized Perim Island in the Bab al-Mandeb Strait over the weekend after taking the nearby port of Mokha, further threatening oil flows through the Red Sea corridor — a route Saudi Arabia has increasingly relied on as the kingdom diverted more shipments away from Hormuz.

Commonwealth Bank of Australia commodities analyst Vivek Dhar said in a note that some of the factors that have cushioned the global oil market against supply disruptions are now weakening. China’s crude imports are edging higher, while additional non-OPEC+ supply outside the Middle East is unlikely to come online until 2027, Dhar said. He added that it remains difficult to predict when oil flows through the Strait of Hormuz will recover materially, given elevated U.S.-Iran tensions, and that CBA’s lower estimate — that global crude and refined-product inventories provide only five to 11 weeks of cover — is becoming increasingly likely.

Saudi Arabia can temporarily maintain crude shipments from Yanbu by drawing on oil already stored at the Red Sea port, according to Rystad Energy analyst Janiv Shah. Those inventories could cover roughly three days of exports, with a range of two to six days depending on how much crude was stored when the pipeline was shut. The kingdom could extend that window by at least another week by drawing on crude stored in Egypt, the Journal reported.

Saudi crude loadings from Yanbu had risen above 4 million barrels a day between April and June as the kingdom diverted more shipments away from Hormuz, before falling to 1.1 million barrels a day in August as Houthi attacks increased risks to Red Sea shipping, according to LSEG data.