Saudi Arabia Shuts Down Pipeline That was a Crucial Hormuz Bypass

Dow Jones
3小时前

DUBAI-Saudi Arabia shut down a crucial pipeline that allowed the kingdom to continue exporting crude oil after Iran closed the Strait of Hormuz, saying it had been attacked multiple times as fighting across the Middle East flared.

The East-West pipeline can carry up to 7 million barrels of crude from Saudi Arabia's oil-producing heartland on the Persian Gulf to the port of Yanbu on the Red Sea. From there, the Saudis had been able to ship oil to customers across the world, alleviating the squeeze on global oil supplies and keep crude prices in check.

A senior Saudi official familiar with the matter said the attacks originated from Iraq on Thursday, where Iran-backed militias have repeatedly targeted the kingdom's infrastructure. The kingdom's Energy Ministry said the attacks caused injuries and led the kingdom to shut down the pipeline, but didn't specify who targeted it.

NASA satellites that track wildfires detected possible blazes overnight into Friday along the East-West pipeline south of Medina. The locations over the past month haven't shown high heat readings there.

The pipeline hit comes as Iran-backed Houthi militants in Yemen cemented their hold on the Bab al-Mandeb strait, another key chokepoint for Saudi oil exports that connects the Red Sea to the Indian Ocean and sea routes to Asia. The Houthis took control of Perim Island, Saudi and Yemeni officials said, and reached the Yemeni ?town of Dhubab, which sits directly on the strait, capping a series of swift Houthi gains.

Oil markets have been rising in recent days, with Brent crude trading above $104 a barrel Friday, as traders are focused on whether strikes on pipelines, ports and tankers could further reduce the amount of Gulf oil reaching the global market. That in turn is hitting the bond market, raising borrowing costs including for mortgages.

The Houthi advances and any significant damage to the East-West pipeline could boost oil prices toward $120 a barrel, though the fallout will depend on the extent of damage, said Hamad Hussain, an economist at Capital Economics.

"For as long as the conflict drags on, the risks to energy supplies and prices will persist," Hussain said.

The pipeline strike tightens the squeeze Saudi Arabia faces on both of its main export corridors. The Iran conflict has constrained shipments through Hormuz, while the Houthis have intensified attacks on energy infrastructure and Saudi Red Sea shipping.

It isn't the first time the East-West pipeline has been pulled into the conflict that began when the U.S. and Israel attacked Iran in February.

Attacks earlier this year damaged a pumping station and reduced the line's capacity by about 700,000 barrels a day. The country restored the pipeline to its full capacity within days. Thursday's attacks targeted several pumping stations, the Saudi official said.

Robin Mills, chief executive of Dubai-based consulting firm Qamar Energy, said that he expects Saudi Arabia to repair any damage relatively quickly but that there is the risk of repeat attacks.

"So while this doesn't end the East-West bypass, it does put it under additional strain, combined with the threat to shipping in the Red Sea," Mills said.

Saudi crude-oil production has already been falling during the war, hitting its lowest level in more than three decades last month, according to the International Energy Agency. The kingdom's crude supply fell 2.3 million barrels a day to 6 million barrels a day in August, the Paris-based IEA said in a report Friday. Saudi Arabia produced around 9.4 million barrels a day on average last year.

The disruptions are adding pressure to the Saudi economy and complicating Crown Prince Mohammed bin Salman's Vision 2030 plans, which rely on sustained state spending to diversify the economy and finance large-scale infrastructure projects.

Saudi gross domestic product contracted 4.7% from a year earlier in the second quarter, as the disruption to oil exports hammered activity. The kingdom's budget deficit, at the equivalent of $42.7 billion in the first half, is already running close to the shortfall it had budgeted for the entire year.

 

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