Saudi pipeline disruption puts further pressure on oil markets

“This is a real blow,” Cahill told Al Jazeera in reference to Saudi Arabia’s decision to temporarily shut down the pipeline after it was hit by drones from Iraq.

Cahill called the pipeline “the principal bypass option to avoid the Strait of Hormuz”.

He said some oil is still moving through Hormuz despite the waterway “not operating at anywhere near capacity”.

Saudi Arabia is also using oil stored in the region and elsewhere to continue supplying customers, he said.

But Cahill said access to the Red Sea has been “absolutely critical”, with the East-West pipeline serving as Saudi Arabia’s main alternative export route.

He said the latest disruption comes as many of the safeguards that helped stabilise oil markets in recent months have weakened, reports AL Jazeera.

“The key buffers that got us through the last six months have basically been worn away,” Cahill said.

He added that “there’s less slack in the system, everything is running hot”, with refined product markets, particularly diesel, even tighter than headline crude prices suggest.

If attacks continue and there is “any real threat that the Red Sea is going to be cut off for some time”, Cahill said it would mean further upward pressure on prices.