Crude oil prices dropped Wednesday after the U.S. government said Saudi Arabia's damaged East-West pipeline would resume operations within days. Independent analysts, however, warned the repair could take weeks, and tankers are still rerouting through a dangerous stretch of the Strait of Hormuz.
Crude oil fell Wednesday as the Trump administration tried to reassure markets that the pipeline would soon reopen. U.S. West Texas Intermediate futures dropped 3.7% to $101.92 a barrel by 11:32 a.m. ET. Brent crude, the international benchmark, traded 3% lower at $105.39 a barrel.
Even so, prices have rallied more than 16% this month as fighting sharply escalated in the Persian Gulf.
Washington calls the outage temporary
U.S. Energy Secretary Chris Wright told CNBC on Tuesday the pipeline outage is a "brief and temporary interruption" that will be measured in days. But independent analysts warned the pipeline could remain down for weeks, pointing to satellite images that showed significant damage to a pumping station.
Saudi Arabia reroutes exports through Hormuz
The Saudis have taken quick action to export more oil through the Strait of Hormuz with U.S. military help while the pipeline is down, Wright said. Four supertankers able to carry eight million barrels total were observed loading at the Saudi ports of Ras Tanura and Juaymah on Tuesday, according to Matt Smith, director of commodity research at Kpler, who said they are likely part of the shuttling effort via the Omani route.
Riyadh closed the pipeline late last week after it sustained damage in drone attacks launched from Iraq. The kingdom has not provided a damage assessment or a timeline for the outage.
A dangerous detour around the war
The pipeline normally lets the Saudis shift exports to the Red Sea while the U.S. and Iran battle for control over Hormuz, once the Gulf states' main export corridor. The U.S. military has carved out a route along Oman's coast that has allowed Gulf states to increase exports through the strait, though flows remain well below pre-war levels.
Even with U.S. protection, the journey stays dangerous, as Iran continues to attack tankers. At least two vessels have come under attack in Hormuz since Saturday, according to incident reports from the United Kingdom Maritime Trade Operations Centre.
Source: US Top News and Analysis
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