Oil continued to rise to a new mark due to shutdown of key Saudi Arabia pipeline
Oil prices are rising for the second consecutive session amid supply disruptions from the Middle East. Brent on September 15 climbed above $107 per barrel and is again approaching the $110 mark, while the key Saudi Arabia pipeline East-West remains shut down after attacks last week.
In morning trading, Brent rose to about $107.5 per barrel, and American WTI - to $103. Saudi Aramco has not yet announced when it will be able to resume operation of the damaged pipeline.
The duration of its downtime is now becoming one of the main factors for the oil market.
Saudi Arabia lost its main bypass of the Strait of Hormuz
East-West pumps oil from eastern Saudi Arabia to the port of Yanbu on the Red Sea. The route allows Riyadh to export crude bypassing the Strait of Hormuz, traffic through which has sharply decreased due to the war in the Middle East.
In recent months, approximately 4-5 million barrels per day were transported through the pipeline - a volume equivalent to about 4-5% of world oil consumption.
After drone strikes on pipeline facilities, Saudi Arabia was forced to temporarily shut it down. The scale of damage and the exact repair time have not yet been announced.
Riyadh is now trying to increase oil shipments through the Strait of Hormuz to compensate for part of the lost flows. However, tanker traffic through this route remains significantly below normal levels.
Thus, the route that was supposed to protect Saudi exports from problems in the Strait of Hormuz has itself become unavailable, and Saudi Arabia again depends more on the unstable sea route through the Persian Gulf.
Risks rising on two key routes at once
The situation is complicated by escalation near another strategic route - the Bab el-Mandeb Strait, which connects the Red Sea with the Gulf of Aden.
Houthis have intensified their offensive along the coast of Yemen and attacks on Saudi infrastructure. This also increases risks for exports through the Red Sea, where East-West leads.
As a result, two routes through which Saudi Arabia can supply oil to the world market are simultaneously under threat: the Strait of Hormuz in the east and the route through the Red Sea in the west.
Analysts note that Saudi Arabia cannot quickly compensate for the loss of East-West with another route.
Goldman sees risk of a new price spike
Goldman Sachs believes that the latest attacks increase the risk of disruptions to shipping and oil supplies spreading to other parts of the region.
Co-head of global commodities at Goldman Sachs Daan Struyven noted that risks to oil prices are currently skewed towards further increases if attacks on transport and energy infrastructure continue.
At the same time, a key factor for the market remains not only the physical loss of certain volumes of oil, but also the possibility of further expansion of the war and disruption of maritime routes.
Brent had already risen sharply last week before the current increase. On Friday, futures approached $110 per barrel during trading - the highest level since May.
While traders await information on the timing of East-West restoration, any new attacks on Saudi infrastructure or deterioration in the Strait of Hormuz could further exacerbate supply shortages and support prices.
Based on materials: Bloomberg, The Wall Street Journal, Al Jazeera
