Crude Oil Surges: WTI Breaks Through $106, Brent Above $109, After Saudi Arabia Shuts Down East-West Pipeline

CommodityGeopoliticsMacro Impact 5
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Global crude oil prices continued to surge, with West Texas Intermediate crude for October delivery rising $5.08, or 5.01%, to $106.47 per barrel, and Brent crude for November delivery rising $3.41, or 3.23%, to $109.09 per barrel, amid concerns over Saudi Arabia's announcement that it is shutting down the East-West Pipeline, which is 1,200 kilometers long and allows Saudi Arabia to transport crude oil without passing through the Strait of Hormuz. In recent months, the pipeline has carried about 4 to 5 million barrels per day, or roughly 4 to 5 percent of global oil supply. Saudi Arabian authorities said the shutdown is a precautionary measure, but have not disclosed a damage assessment or how long it might last. The pipeline was ordered shut last week after suffering damage from a drone attack launched from Iraq. Meanwhile, Yulia Chestkova Grigsby, a senior commodities analyst at Goldman Sachs, said the attack on oil infrastructure represents a significant escalation of conflict and increases the possibility that Brent crude could surge past $120 per barrel. Qatar warned that if shipping through the Bab el-Mandeb Strait is disrupted following the closure of the Strait of Hormuz, the consequences could be severe, stressing that the blocking of international shipping routes must not become the new normal. Ibrahim bin Sultan Al-Hashmi, director of the media and communications department at Qatar's Ministry of Foreign Affairs, said during a weekly press briefing that the world is already suffering heavily from the closure of the Strait of Hormuz and cannot bear any additional burden if the Bab el-Mandeb Strait falls into the same situation. He stressed that negotiation remains the only truly viable path forward, and that the regional crisis will be one of the key issues Qatar's delegation will raise at the upcoming United Nations General Assembly. Meanwhile, the Houthis in Yemen seized the strategic port city of Mocha on September 10, before pushing south the following day into areas in the Bab el-Mandeb Strait and seizing Mayun Island in the center of the strait, enabling the Houthis to tighten their control over shipping in the strait that connects the Red Sea to the Gulf of Aden.

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