Crude oil has crossed $100 a barrel as Saudi Arabia faces disruptions to its alternative export route following attacks on the East-West Pipeline. The global crude oil market has entered a new phase of uncertainty after Saudi Arabia suspended crude loadings at its Red Sea port of Yanbu and cancelled some crude cargoes to Europe following drone attacks on its strategic East-West Pipeline. Oil prices had previously remained below $100 because traders believed a complete blockade of major oil transit routes, especially the Strait of Hormuz, was unlikely. The latest attack has exposed the vulnerability of alternative export routes and raised concerns about a potential supply crunch, with markets now pricing actual loss of export capacity rather than just geopolitical risk premiums. September crude oil futures were trading at ₹9,680 on Multi Commodity Exchange (MCX) during the initial hour of trading on Friday, against the previous close of ₹9,758, down by 0.80%, and October futures were trading at ₹9,252 against the previous close of ₹9,332, down by 0.86%. The suspension of Saudi Arabia's East-West Pipeline threatens up to 4 million barrels per day of exports, equivalent to nearly 4% of global oil demand, which could significantly tighten market balances if the disruption persists for an extended period.
China's massive oil stockpile has emerged as a crucial factor in preventing oil prices from reaching the dire projections that analysts warned of at the start of the Iran conflict. Beijing spent years and billions of dollars amassing the world's largest oil stockpile, building its strategic reserve to about 1.4 billion barrels by the end of last year, according to the US Energy Information Administration's estimates. To protect China from foreign supply risks, Xi made energy self-reliance a part of the country's latest five-year plan. China's crude imports averaged just 8.1 million barrels per day in the second quarter, that's almost 4 million barrels per day, or 32% lower than in the first three months of the year, according to US data. Drawing from the massive stockpile allowed China, the world's second-biggest oil consumer and Iran's top buyer, to dramatically cut crude imports once the US and Israel began their bombardment and Tehran effectively closed the Strait of Hormuz. The country was also helped by its shift toward electric vehicles in recent years and increasingly tapping into other energy alternatives. "The Chinese deserve credit," said retired US Navy Rear Adm. Mark Montgomery, an analyst at the Foundation for Defense of Democracies. "They did in 10 years what took us 25 years after the 1973 oil crisis to do: really build a kind of strategic petroleum reserve that could allow you to weather this." China's oil import diet in turn helped ease global demand, softening the upward price effects for the United States, Europe and beyond.
Saudi Arabia has made significant progress in restoring its critical East-West pipeline infrastructure following last week's drone attacks. Three of the pipeline's pumping stations were damaged in the attack, with satellite imagery and three industry sources confirming this is one more than previously assessed, according to Reuters. The Saudi pipeline disruption threatens up to 4% of global oil supply, with buyers and traders saying Saudi Arabia could exhaust crude available for export within days unless the pipeline resumes. A key development is Saudi Arabia's plan to restore its damaged East-West oil pipeline, which runs to the kingdom's Red Sea coast, aiming to bring back roughly half of the pipeline's capacity within days, according to a person familiar with the matter. Market reports said Saudi Arabia wants to reach about half of the capacity of its East-West pipeline within a few days, with Bloomberg reported that Saudi Arabia was seeking to return about half the capacity of its East-West oil pipeline within days after the critical link to the Red Sea was halted last week following drone attacks. US Energy Secretary Chris Wright has said that crude should be flowing through the pipeline within days, with the pipeline carrying an average of 2.6 million to 4 million barrels per day since late August. Yanbu became Saudi Arabia's main outlet for oil exports after Iran began blockading the Strait of Hormuz after the US and Israel attacked the country at the end of February, with Hormuz previously the conduit for one-fifth of the world's oil supply.
India imports more than 80% of its crude oil requirements, making it highly sensitive to global price fluctuations. Saudi Arabia accounts for roughly 8-10% of India's crude imports, making the kingdom one of India's key suppliers. The immediate impact would likely be higher import costs rather than a physical supply shortage, as Indian refiners can diversify purchases toward Russia, Iraq, UAE and the United States. However, sustained prices above $100 would widen India's current account deficit, increase fuel inflation, pressure the rupee and raise costs across transportation and manufacturing sectors. A severe global oil shortage is unlikely in the immediate term, as commercial inventories, strategic petroleum reserves, and alternative suppliers can provide a temporary buffer. However, fully replacing Saudi crude is difficult because of differences in crude quality, refinery requirements, and limited spare production capacity. The broader regional situation remains challenging for other major exporters as well, with Iraq continuing to face export constraints, Kuwait remaining heavily dependent on Gulf shipping lanes, and Qatar's LNG exports encountering logistical complications.
Oil prices are likely to remain highly volatile in the near term, with Brent crude potentially retreating toward below $90 range if Saudi Arabia restores pipeline operations within a few weeks and regional security improves. However, if disruptions persist and attacks continue, prices could test $115-$125 or more per barrel, especially if additional export infrastructure is affected. The probability of a ceasefire remains uncertain, with diplomatic efforts ongoing but both military tensions and attacks on critical energy infrastructure suggesting that markets will continue to price a substantial geopolitical risk premium into crude oil for the foreseeable future. Analysts at Bank of America last week forecast oil at $83 a barrel for the second half of the year "in light of more persistent disruptions to Hormuz," but said they still expected shipping through the strait to gradually pick up. However, if violence escalates and keeps a chokehold on traffic, prices could reach $95 to $120 a barrel, while damage to major energy infrastructure could produce spikes of up to $150 a barrel.
