INSTANT VIEW: Analysts' reactions to attacks cutting Saudi oil output and East‑West Pipeline flows

Attacks on Saudi energy facilities have cut the kingdom's oil production capacity by around 600,000 barrels per day and the throughput on its East-West Pipeline by about 700,000 bpd, Saudi state news agency SPA reported on Thursday, citing an official source at the energy ministry.

The U.S. Energy Information Administration estimates Saudi oil production at 11.13 million bpd, or roughly 11% of global output, based on 2023 data.

The East‑West Pipeline has a maximum capacity of about 7 million barrels per day, of which around 5 million bpd are available for export.

Saudi Arabia, the world's top oil exporter, plays a central role in global crude markets. It has come under attack from hundreds of Iranian missiles and drones since the start of the U.S.-Israeli war on Iran, most of which were intercepted, authorities have said.

Below are some reactions from analysts and traders:

SHOHRUH ZUKHRITDINOV, A DUBAI-BASED OIL TRADER:

"This is a logistics shock layered on top of a production shock. The market has lost its main workaround for the Strait of Hormuz."

EDWARD MEIR, MAREX ANALYST:

"The oil market is quite tight, and although the Saudis have the benefit of exporting via their pipeline to the Red Sea the fact that this has also been impacted is somewhat surprising and even more bullish (to oil prices), as the thinking was that this transit point was experiencing fewer problems.

"The outage of Gulf exports also explains why physical prices are well above futures and have not dropped much of late."

JOHN PAISIE, PRESIDENT OF STRATAS ADVISORS:

"The lost production and exports through the East-West Pipeline builds on the ongoing disruption of oil supply stemming from the effective closure of the Strait of Hormuz - and adds to the upward pressure on oil prices."

"With the strait still closed, there is not much that OPEC+ members can do in the short-term since Saudi Arabia and UAE are the only members with a material level of spare capacity - but both are being affected by the Strait being closed."

ASHLEY HIKMET, HEAD OF CRUDE OIL TRADING AT AXIS LIMITED (ONYX CAPITAL):

"The impact on Saudi oil infrastructure appears particularly significant, given the strategic importance of the Yanbu East-West Pipeline. This critical artery has enabled Saudi crude to bypass the Strait of Hormuz of late, flowing directly to Red Sea export terminals."

"A reduction in throughput of approximately 600,000 barrels per day represents roughly 10% of the pipeline’s current operating rate. In a global market already starved for physical barrels, this disruption is likely to exert meaningful upward pressure on prices in the near term."

GIOVANNI STAUNOVO, UBS ANALYST:

The developments "further tighten the oil market, reducing the flows bypassing the Strait and reducing the kingdom's production capacity."

-Ashitha Shivaprasad, Georgina McCartney, Nicole Jao and Shariq Khan/Reuters