Saudi pipeline shutdown could cut 120 million barrels from global supply, analysts warn

Warnings of a "catastrophic" supply shock to global oil markets have emerged as Saudi Arabia's critical pipeline remains shut and fighting intensifies between the kingdom and Iran-backed Houthi rebels in Yemen.

The New York Times, citing analysis by maritime intelligence firm Kpler, reported Wednesday (local time) that a month-long shutdown of Saudi Arabia's East-West Pipeline — knocked offline by a recent attack — could remove roughly 120 million barrels from international oil markets.

That figure represents about 4 percent of global monthly oil supply. Kpler estimates the pipeline has been carrying approximately 4 million barrels per day.

"A prolonged disruption to Saudi Arabia's pipeline network could send shockwaves across global energy markets," The New York Times said.

The East-West Pipeline was shut down after a drone strike launched from Iraq on Friday. The Saudi government said Iran-linked forces fired the drones from Iraqi territory to attack the pipeline facility, though the identity of the attackers has not been independently confirmed.

The roughly 1,200-kilometer pipeline runs from Saudi Arabia's eastern oil fields across the Arabian Peninsula to the Red Sea port of Yanbu.

Crude loaded at Yanbu can be exported to Asia and other markets via the Suez Canal at the northern end of the Red Sea or through pipelines running across Egypt.

The East-West Pipeline has therefore served as a critical bypass route since Iran's blockade of the Strait of Hormuz, playing a decisive role in cushioning the impact of the prolonged closure.

The escalating clashes between Saudi Arabia and the Houthi rebels — Iran's allies in Yemen — are deepening concerns about further supply disruptions.

With the pipeline already offline, the Houthis last week seized a strategic position near the Bab el-Mandeb Strait and have since struck major Saudi energy infrastructure, piling pressure on the kingdom's crude exports.

Saudi Arabia has responded with missile strikes against the Houthis, and the military confrontation between the two sides appears to be intensifying.

Experts warn that the global economy now faces an unprecedented energy crisis, The New York Times reported.

Amena Bakr, Kpler's head of Middle East and OPEC analysis, said Iran was escalating attacks and its proxies were active "with two critical maritime chokepoints blocked and no signs of diplomatic negotiations." She called the situation "catastrophic from an energy security standpoint."

Goldman Sachs warned in a recent report that sustained military attacks in the Persian Gulf and the Red Sea could push international oil prices to $120 per barrel.

The trajectory of global oil prices will largely depend on when the Saudi pipeline resumes operation.

Estimates of how long repairs will take vary widely. The Saudi government and state oil company Aramco have not issued any official statement on the extent of the damage or a timeline for restoration.

Bakr told The New York Times that repairs could take five to six weeks, though partial restoration might be completed sooner.

Reuters, citing three sources in the oil industry and security sector, reported that two pumping stations along the pipeline had been damaged and that the repair schedule remains unclear.

The US government, however, struck an optimistic note. Energy Secretary Chris Wright told CNBC on Tuesday that "this will be a short and temporary disruption," adding that oil flows through the pipeline would resume soon.

Robin Brooks, a senior fellow at the Brookings Institution, also said that "historically, facilities like this have been repaired within weeks," adding that satellite imagery already shows signs of repair work underway.

Reports that Saudi Arabia is exploring alternative temporary export routes — including loading crude directly onto ships — have also helped ease some fears of a prolonged supply disruption.

Reuters earlier reported, citing sources, that Aramco had offered its long-term Asian contract buyers additional ship-to-ship crude transfers off the port of Sohar in Oman.