SEATTLE (Oil Monster): Crude oil prices gained Monday as the shutdown of Saudi Arabia’s East-West pipeline raised concerns about a temporary squeeze in global supplies. The pipeline, which transports crude from the Gulf to the Red Sea, considered an alternative route to the Strait of Hormuz, is expected to remain largely out of service for three to five weeks following last week’s attack.
HSBC analysts led by Kim Fustier called the disruption an unexpected setback. The bank had earlier noted that the Saudi and UAE pipelines are expected to provide alternative export routes during disruptions around Hormuz.
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Saudi crude exports through its western coast had already fallen to roughly 3 million barrels per day (bpd) in August, down from 4-4.5 million bpd previously. HSBC estimates that this outage, if it lasts for a month, would remove approximately 90 million barrels from the global market. Consequently, the bank projects a temporary global supply deficit of approximately 6 million bpd between mid-September and mid-October.
Repair timing remains a major uncertainty. Meanwhile, reduced Gulf refined-product shipments have tightened fuel markets, with HSBC estimating a decline of about 3.4 million bpd, including 2.1 million bpd of diesel, gasoline and jet fuel.
HSBC warned that prolonged disruption could push Brent crude toward $120 per barrel under a worst-case scenario.
