Saudi east-west pipeline, Yanbu port shipments resume

Hopes grow for supply chain bypass around Strait of Hormuz

WTI settles at $89.38, lowest since Aug. 31

Brent also falls 2.6% to $102.59

A naval vessel of the internationally recognized government based in Aden, Yemen, patrols a shipping lane near Hanish Island in the Red Sea on Sunday (local time). [AFP]
A naval vessel of the internationally recognized government based in Aden, Yemen, patrols a shipping lane near Hanish Island in the Red Sea on Sunday (local time). [AFP]

International oil prices fell sharply after Saudi Arabia resumed crude exports through the Red Sea, fueling expectations that Middle East supply disrupted by US-Iran military tensions could recover. West Texas Intermediate dropped below $90 per barrel.

November WTI futures settled at $89.38 per barrel on the New York Mercantile Exchange on Tuesday (local time), down 3.48% from the previous session. It was the first time WTI closed below $90 since Aug. 31.

November Brent crude futures also fell 2.56% to $102.59 per barrel on the London ICE Futures Exchange — the lowest level since Sept. 22.

The sell-off was driven by news that Saudi Arabia had resumed Red Sea crude exports. According to trade sources and shipping data, the east-west pipeline connecting Saudi Arabia's eastern oil fields to the Red Sea coast returned to normal operation, allowing crude loading at Yanbu port to restart.

The east-west pipeline is a critical bypass route that allows Saudi crude to reach the Red Sea without passing through the Strait of Hormuz, the world's most important oil chokepoint. It is widely regarded as a key buffer against supply shocks should military tensions in the region disrupt tanker traffic through the strait.

Saudi Arabia halted all east-west pipeline operations and crude exports through Yanbu last November after a drone strike attributed to Iran-backed Iraqi militias. Restoration work followed, and the pipeline resumed operation on Sept. 22, with crude loading also returning to normal.

Markets grew increasingly optimistic that the resumption of Saudi Red Sea exports could ease some of the supply anxiety over Middle Eastern crude that had built up amid US-Iran tensions. With an alternative shipping route that reduces dependence on the Strait of Hormuz now back online, the geopolitical risk premium priced into global oil markets appeared to deflate quickly.


sjy@heraldcorp.com