Key facts
- Houthi rebels seized Greater and Lesser Hanish islands in the Red Sea.
- The Saudi Arabia East-West pipeline was damaged by drone attacks and is out of service.
- The 1,200-kilometer length of the pipeline is difficult to defend.
- The International Energy Agency described the current conflict as the largest oil-supply disruption in market history.
Oil prices continued to climb early Tuesday as Houthi rebels in Yemen expanded their control over the Red Sea coast, while attacks on a key Saudi onshore oil pipeline heightened concerns about additional disruptions to already severely impacted oil supply from the Middle East. Brent crude prices were up by 1.67% in Asian trade at $107.45 per barrel, and the U.S. crude oil benchmark rose by 1.9% to $103.26.
As hopes of talks between the U.S. and Iran fade, so too have hopes of a wider regional agreement about the Strait of Hormuz. A meeting in Oman involving Iran and other Persian Gulf states that was scheduled for Monday has been postponed.
Last week's attack on the East-West oil pipeline in Saudi Arabia, a vital conduit for redirecting the Kingdom’s oil exports away from the Strait of Hormuz, forced the Saudis to shut down the pipeline. This has put further upward pressure on oil prices as the market fears the pipeline disruption could last for weeks and oil for export at Yanbu’s storage tanks may run out before the pipeline restores full operations. The 1,200-kilometer length of the pipeline is not easily defended. The Saudi government claims that 7 million barrels per day (mbpd) of crude oil can flow westward through the pipeline to the port of Yanbu, though current exports are thought to be lower (perhaps 5 mbpd) than that given infrastructure restraints. Drone attacks damaged at least two pumping stations, forcing Saudi Arabia to shut the pipeline. Repairing or replacing these stations may be more involved than simply replacing a section of damaged pipeline since the pipeline sits mostly above ground.