Saudi Arabia's key “lifeline” has been restored! It is reported that the east-west oil pipeline has resumed exports, and the supply pressure on the global oil market is expected to ease

The Zhitong Finance App learned that, according to people familiar with the matter, after the Saudi East-West oil pipeline was attacked by drones earlier this month and forced to close, the pipeline has now been repaired. According to reports, Saudi Aramco has been testing and gradually boosting the east-west oil pipeline last week, with the goal of restoring meaningful oil flow by the weekend. People familiar with related operations said that the pipeline's overseas crude oil transportation has now resumed.

As of press release, Brent crude oil futures rose 2.13% to $99.52 per barrel; WTI crude oil futures rose 2.50% to $94.72 per barrel. Both increases were narrower than earlier in the day.

Saudi Arabia's Ministry of Energy issued a statement on September 11 saying that on the morning of the 10th, the Riyadh section and the Medina section of the country's east-west oil pipeline were attacked several times, and preventive measures have now been taken to close the pipeline. The East-West pipeline is a key alternative route for Saudi oil exports to bypass the Strait of Hormuz. The Saudi east-west oil pipeline was built in the 1980s. The total length is more than 1,200 kilometers from the Persian Gulf oil-producing region in eastern Saudi Arabia to Yanbu Port on the Red Sea coast in the west. After the Strait of Hormuz was affected by war and shipping was blocked this year, Saudi Arabia quickly switched to exporting oil from the Red Sea through this oil pipeline. According to reports, after the US-Israel-Iran conflict broke out, the average daily transportation volume of the East-West oil pipeline rapidly increased from about 3 million barrels per day until now to 7 million barrels per day.

The resumption of exports from the East-West oil pipeline will re-open up an alternative export route that Saudi Arabia has been using during the Middle East war. Although Saudi Arabia has increased crude oil shipments through the Strait of Hormuz this month, the pipeline's export resumption will provide relief for buyers who have been pressing for supplies. Earlier, some European customers were even told that they would not be able to receive any crude oil quotas next month under long-term contracts.

When the east-west oil pipeline returns to full operation, traders will keep a close eye on how much crude oil Saudi Arabia still transports through the Strait of Hormuz. In September, Saudi Arabia used the Strait of Hormuz route to raise overall crude oil exports to wartime highs, exceeding 5 million barrels per day, most of which were supplied to Asia.

As the war between the US and Iran is about to continue until the 7th month, the Persian Gulf route is still full of risks, and ships are attacked from time to time. Meanwhile, the Red Sea route along Saudi Arabia's western border is also facing threats from the Houthis in Yemen. The group stepped up its attacks this month, and the southwestern Saudi energy infrastructure as well as the port of Yanbu were targeted. Yanbu is a Red Sea port and the end point of the East-West Pipeline. Saudi Arabia has issued multiple warnings against various cities, including Riyadh, Jizan, and Mecca, the mecca of Islam.

The combination of multiple pressures, such as the blockage of the Strait of Hormuz channel, disrupted Red Sea shipping, and the closure of Saudi Arabia's east-west oil pipeline, is putting unprecedented pressure on the global crude oil supply system. Ben Cahill, a senior researcher at the US Atlantic Council Global Energy Center, pointed out earlier that the Red Sea waterway has always been critical. In the past six months, one of the major guarantees of energy security is that risk zones can be circumvented through Saudi Arabia's east-west oil pipeline and another high-capacity alternative pipeline from the UAE. If the east-west oil pipeline is closed for a long time, it will present a huge challenge, because this pipeline is currently the most important pipeline to bypass the Strait of Hormuz.

Cahill added that in the past six months, all kinds of buffer space to help the market withstand shocks have basically been exhausted. Releasing strategic crude oil reserves has played a key role, but such large-scale releases cannot be repeated. If the attacks continue and the Red Sea waterway is at risk of being interrupted for some time, then oil prices will rise further.

Furthermore, the prospects for shipping in the Strait of Hormuz still depend on the US-Iran game. Currently, the prospects for negotiations between the US and Iran are uncertain. US President Trump said on September 27 that he expects the US and Iran to resume negotiations within the next week. Trump also said that he “has been considering” whether to resume military attacks on Iran, while the US military is assisting in transporting “large amounts of oil” from the Strait of Hormuz.

The media quoted regional sources as saying that it is expected that the US and Iran will hold a new round of indirect talks as early as the 28th. Qatar and other mediators are mediating, but there are huge differences between the US and Iran on key issues. Iran wants to focus negotiations on opening the Strait of Hormuz and lifting the US maritime blockade against Iraq, while the Trump administration demands that Iran agree to make concessions on the nuclear issue. However, Iranian media reported on the 28th that the Iranian delegation has no plans to hold talks with the US in New York.

On September 22, US presidential envoy Witkov and Trump's son-in-law Kushner held indirect talks with Iranian Foreign Minister Alagzi during the UN General Assembly in New York. According to reports, Iran proposed that if the US lifts the maritime blockade, lifts oil sales sanctions, and resumes a regional cease-fire, Iran will reopen the Strait of Hormuz within seven days and restart nuclear negotiations. However, Trump confirmed to the media on September 26 that he had rejected Iran's proposal.

In an interview on the 27th, Alagzi said that despite Trump's public remarks, the US side has yet to officially communicate its decision to reject Iran's proposal through the mediator. Iran is ready to resume war with the US, and is also ready to engage in diplomatic contacts at any time.