Saudi Arabia’s Critical Oil Bypass Comes Under Threat

Houthi strikes on Saudi oil infrastructure have reignited worries about Middle Eastern crude availability after satellite imagery from Sentinel and NASA showed active fires and thermal anomalies along the kingdom’s East-West pipeline. The conduit, which can carry about 7 million barrels per day, may have sustained damage that market participants say could endanger roughly 3–4 million b/d of Saudi exports if disruptions persist.

The attacks coincided with a sharp repricing of regional crude. ICE Brent traded near $105 per barrel while some deliverable Middle Eastern grades, including Murban and Oman, were reported around $120 per barrel. That spread and the risk to flows prompted several Asian refiners to press Saudi Aramco to move 2027 term pricing onto the ICE Brent benchmark after regional benchmarks diverged by roughly $18 above Brent.

Saudi production also fell markedly in August to 6.24 million b/d, a decline of 1.9 million b/d from July and the lowest monthly output since 1990, according to the report. Houthi-driven disruptions have cut exports by about one-third, tightening routes for Gulf crude and complicating logistics for buyers that rely on shipments bypassing the Strait of Hormuz.

Policy and market responses are emerging alongside the physical disruptions. Gulf foreign ministers met over the weekend and helped temper a runaway price spike, while OPEC trimmed its 2026 global oil demand growth forecast to 380,000 b/d — a 200,000 b/d downward revision from a month earlier and the group’s fifth straight cut — even as it expects a 2.36 million b/d rebound in 2027. Refiners, traders and consuming nations are already adjusting contracts and supplies as they weigh the prospect of prolonged interruptions to flows through the region.