Oil surges on report Saudi pipeline will take weeks to reopen

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeCommoditiesEnergyOil & GasOil surges on report Saudi pipeline will take weeks to reopenThe halt of the pipeline knocks out Saudi Arabia’s most important workaround since the Iran war choked off exports from the Persian GulfAuthor of the article:Charles Gorrivan and Alex LongleyAn employee looks out over oil transport pipelines on the Arabian Sea in Saudi Aramco's Ras Tanura oil refinery and oil terminal in Ras Tanura, Saudi Arabia, on Oct. 1, 2018. Photo by Simon Dawson/BloombergOil surged on a report that Saudi Arabia may take weeks to reopen a pipeline that’s been key to bypassing the Strait of Hormuz during the U.S.-Iran war.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountBrent rose about five per cent toward US$110 a barrel, before paring gains slightly. The kingdom’s East-West pipeline, which was halted after it was struck by militants, will be out of service for several weeks, the Associated Press reported, citing two regional officials. Saudi energy ministry officials didn’t immediately respond to a request for comment. Saudi Aramco didn’t respond to earlier inquiries about how long the disruption would last.U.S. Energy Secretary Chris Wright, meanwhile, said on Monday he expects the Saudi pipeline to be up and running “very soon.”The halt of the pipeline, which has the capacity to ship about 7 million barrels a day to the kingdom’s Yanbu hub on the Red Sea, knocks out Saudi Arabia’s most important workaround since the Iran war choked off exports from the Persian Gulf. The market impact will depend on how much oil can be drawn from storage at Yanbu, how long it will take to get crude flowing again and how much can be rerouted by sneaking barrels through the Strait of Hormuz.“It all boils down to the duration,” said June Goh, senior oil market analyst at Sparta Commodities SA. If flows resume quickly, the impact should be limited as inventories at Yanbu, the pipeline’s western end, could be tapped, she said. But a prolonged shutdown could force output cuts, she added.Oil prices were already rallying before the attack. The global benchmark moved back above US$100 for the first time since July last week, as sliding inventories and rising Chinese buying tightened the market. Brent crude is up more than 75 per cent this year.The crisis is delivering an inflationary jolt to the global economy as the cost of natural gas and fuels also surge. After U.S. data showed the pace of consumer price gains marched higher in August, the United States Federal Reserve is widely expected to raise rates this week.The market for oil products has been especially strained. Diesel futures are trading at around US$200 a barrel, as fuel supplies have been disrupted in both the Middle East and Russia, where Ukrainian strikes have hindered refining capacity. Over the weekend, U.S. President Donald Trump said he’d warned Ukrainian President Volodymyr Zelenskyy to stop targeting Russian refineries, after the strikes curtailed diesel production and helped drive prices for the fuel to record levels.Refiners are now paying enormous premiums to secure crude as the cost of selling fuels is soaring. They’re willing to pay record amounts for ships to carry those barrels across the world, with vessel availability also incredibly scarce.Meantime, tensions over the vital Strait of Hormuz remain high, as diplomacy appears far from yielding a solution. A meeting between Iran and several Gulf Arab nations over a temporary shipping lane through the waterway was postponed, highlighting tensions with the Islamic Republic following the recent flare-up in fighting.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Wright said he was confident that flows through Hormuz will increase in the weeks ahead, and that over 12 million barrels went through the chokepoint last night.Even before the assault on the East-West conduit, oil output from Saudi Arabia had been under pressure. Riyadh recently reported to OPEC that its crude production last month sank to the lowest level since 1990.The kingdom’s storage at Yanbu could support exports for five to seven days, but a pipeline outage beyond that would cause “huge disruption,” said Suvro Sarkar, head of energy research at DBS Bank Ltd. Pending clarity on repairs, the near-term path pointed toward a test of US$120 a barrel, he said.With assistance from Kanoko Matsuyama, Bingyan Wang and Salma El WardanyNotice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.