Saudi Arabia has shut a critical oil pipeline. Here’s why it matters for the global oil market

Key Points:

• Saudi Arabia has shut down its East-West Pipeline due to drone attacks from inside Iraq, causing injuries and some damage; no group has claimed responsibility, but the US suspects Iran-backed proxies, which Iran denies.
• The East-West Pipeline is crucial for rerouting Saudi crude from the Persian Gulf to the Red Sea and coastal refineries, and its closure could remove up to 4% of global oil supply, worsening an already fragile market.
• The pipeline shutdown, combined with Iran-backed Houthi rebels capturing strategic Red Sea locations, raises fears that key export routes for regional oil are closing, leading to a more than 3% rise in Brent and WTI crude prices.
• The pipeline typically pumps around 6 million barrels per day, supporting both crude exports and refinery supply; a prolonged outage could severely impact diesel availability and prices, which are already at record highs in the US.
• While Saudi Arabia may resume partial flows during repairs, a prolonged shutdown could escalate the crisis rapidly, as current crude inventories at Yanbu are expected to last only about 4-7 days.