Global crude oil prices retreated about 4% on Wednesday as the US administration stepped in to ease supply anxiety following damage to Saudi Arabia’s East-West pipeline. International benchmark Brent crude traded at $104.80 per barrel, while US benchmark West Texas Intermediate fell to $101.59 per barrel amid ongoing Middle East disruptions.
Pipeline Damage and the Red Sea Export Pivot
Crude oil markets faced intense upward pressure earlier in the week after Saudi Arabia shut down its vital East-West pipeline late on a recent Friday as a precaution following attacks by Houthi rebels. The 750-mile-long infrastructure asset, which normally carries 7 million barrels per day of crude from the kingdom’s eastern oil-producing regions to the Red Sea port of Yanbu, allows shipments to bypass the Strait of Hormuz according to the reporting outlet.
Following the pipeline closure, Saudi Aramco delayed oil deliveries to some European customers. With the pipeline offline, Saudi Arabia pivoted to export most of its oil through the Red Sea over the preceding two months. However, escalating tensions in Yemen complicated that logistics chain as advances by Houthi rebels secured territory along the Red Sea, including the capture of islands near the Bab-al-Mandeb Strait, Perim Island, and the port city of Mokha.
US Intervention and Differing Repair Timelines
Prices reversed direction on Wednesday as government officials moved to calm nervous markets. US Energy Secretary Chris Wright stated that the damaged Saudi pipeline was expected to resume operations within days, characterizing the disruption as temporary. Energy Secretary Wright also noted that 18 million barrels of crude oil and refined products passed through the Strait of Hormuz on Tuesday, easing global supply worries.
Not all observers share the optimism regarding the repair schedule. Independent analysts warned that restoring the pipeline could take several weeks rather than days. Meanwhile, Saudi Arabia sought to return about half the capacity of the East-West pipeline within days following a shutdown last week because of drone strikes.
Broader Supply Contractions and Regional Conflicts
The pipeline incident compounded an already tight global energy landscape characterized by widespread infrastructure attacks and lower output figures. Official data released by Saudi Arabia showed that its crude production in August dropped to 6.238 million barrels per day, marking the lowest level since 1990. Data compiled by Bloomberg, Kpler, and Vortexa indicated that August crude exports fell to about 3 million barrels per day, representing a nine-year low.
Vitol Group reported that global oil markets continue to tighten due to the loss of approximately 2 million barrels per day from Middle East crude exports, compounded by an additional 2 million barrels per day offline from Russia following Ukrainian drone strikes. Those Ukrainian attacks on energy infrastructure pushed Russian crude production in July to 8.89 million barrels per day—the lowest in six years—while Russian gasoline production in August fell to roughly 80,000 tons a day, covering only 70% of domestic demand.
US Inventories and International Energy Agency Projections
Additional downward pressure on prices arrived via domestic US inventory data. Commercial crude oil stocks in the United States decreased by 640,000 barrels to settle at 423.4 million barrels for the week ending September 11, according to official government figures. That decline missed market expectations for a larger draw, muting any supportive effect on pricing, although inventories at the Cushing, Oklahoma, delivery hub also declined. The official figures stood in stark contrast to an earlier estimate from the American Petroleum Institute, which had suggested an increase of 7.1 million barrels.
On the macroeconomic front, the International Energy Agency warned that high oil prices and restricted supply will trigger the largest drop in global oil demand this year since the Covid-19 pandemic. Consequently, the agency raised its global oil deficit estimate for the year to 1.7 million barrels per day, up from last month’s projection of 1.3 million barrels per day, while delaying the return of a global oil surplus until 2027.
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