Crude Oil Spikes Past $108 as Saudi Pipeline Shutdown Deepens Middle East Supply Shock

Key Points

• Brent crude settled at $108.75 a barrel, while WTI closed at $105.83, with both benchmarks reaching their highest levels in about four months.
• Saudi Arabia’s East-West pipeline remains offline after an attack, removing a major route that allowed crude exports to bypass the Strait of Hormuz.
• Houthi forces have expanded their presence around the Bab el-Mandeb Strait, adding another potential disruption point for global oil shipments.
• Chevron CEO Mike Wirth has warned that oil-market supply buffers have been significantly depleted, making a quick decline in prices harder to envisage.

Oil Prices Rise as Saudi Pipeline Remains Offline

Brent crude climbed to $108.75 per barrel on Tuesday, September 15, marking a 2.9% daily increase. WTI rose 4.4% to $105.83, according to Reuters.

The rally followed growing concerns over Saudi Arabia’s ability to move crude to international markets after the kingdom suspended operations on its East-West pipeline.

The 1,200-kilometre pipeline connects oil-producing areas in eastern Saudi Arabia with the Red Sea port of Yanbu. It has become particularly important because it provides an alternative route that avoids the Strait of Hormuz, where oil tanker traffic has been severely disrupted.

The pipeline has transported roughly 4 million to 5 million barrels per day in recent months, equivalent to around 4%–5% of global oil supply. Its closure therefore removes an important outlet at a time when other Middle East export routes are already under pressure.

Houthi Activity Adds Pressure to Regional Oil Flows

The Saudi pipeline disruption is occurring alongside increased activity by Houthi forces in Yemen.

The group has expanded its control around the Bab el-Mandeb Strait, a strategic maritime chokepoint connecting the Red Sea with the Gulf of Aden. The development has raised concerns that shipping through another major route for global energy trade could face further disruption.

The combination of risks around the Strait of Hormuz and Bab el-Mandeb has increased the importance of alternative routes and available inventories.

Saudi Arabia had relied more heavily on its East-West pipeline after flows through Hormuz were severely restricted. With that pipeline now offline, more pressure could fall on the remaining export infrastructure and shipping routes.

Global Oil Supply Buffers Are Shrinking

The latest price move also reflects concerns about declining supply buffers.

Chevron CEO Mike Wirth said on September 11 that the crude inventories and other buffers that had helped limit the impact of earlier supply disruptions had largely been used. He said it was becoming harder to see a scenario in which oil prices softened quickly, while risks remained to the upside over the following months.

The warning comes after months of supply disruptions connected to the conflict in the Middle East. Commercial inventories have been drawn down, while some countries have released strategic crude reserves to help offset lost supply.

With fewer spare buffers available, another disruption to production, transportation or exports could have a more immediate impact on prices.

Oil Market Faces Conflicting Signals

Despite the supply concerns, oil prices eased slightly in early trading on Wednesday.

Reuters reported that Brent futures were down $0.93, or 0.86%, at $107.82 per barrel, while WTI fell $0.97, or 0.92%, to $104.86. The decline came after U.S. crude inventories unexpectedly increased by 7.1 million barrels for the week ending September 11, according to American Petroleum Institute data.

The move highlights the competing forces currently affecting the oil market.

On one side, disruptions to Saudi infrastructure, shipping risks and tighter global inventories are supporting prices. On the other, higher U.S. inventories could temporarily ease concerns about near-term crude availability.

Markets are therefore likely to remain sensitive to developments around Saudi Arabia’s pipeline, regional shipping routes and any changes in Middle East production or exports.

What Could Drive Oil Prices Next?

The timing of repairs to Saudi Arabia’s East-West pipeline will be a key factor for the market.

Estimates for the repair period vary. Some reports suggest the pipeline could return to operation within days, while other estimates indicate that repairs could take several weeks.

Meanwhile, Saudi Arabia has also suspended some crude loadings at Yanbu following the attacks, adding to immediate concerns over export availability.

Further escalation around the Strait of Hormuz or Bab el-Mandeb could add another layer of risk, while a restoration of disrupted infrastructure or improvement in shipping conditions could reduce some of the geopolitical premium currently embedded in crude prices.

For traders, the key variables remain Middle East supply disruptions, Saudi export flows, shipping conditions and global crude inventories.

As of September 16, Brent remains above $107, keeping the market close to the $110 threshold after a sharp rise through the first half of the month.