Oil prices climbed this week after Saudi Arabia closed its East-West pipeline, one of the main arteries that moves the kingdom's crude across the country. The shutdown, coming against a backdrop of rising tensions across the Gulf, revived worries about the reliability of Middle East supply and drove U.S. crude past $106 a barrel.

The East-West pipeline is central to how Saudi Arabia gets oil to market. It gives exporters a route across the country that avoids the Strait of Hormuz, the narrow waterway at the mouth of the Persian Gulf through which much of the world's seaborne oil passes. With the pipeline offline, some of that flexibility disappears.

Saudi Arabia has canceled some crude cargoes in the wake of the closure, a step that added to the sense of disruption. Traffic through the Strait of Hormuz has also fallen, compounding concerns about how freely oil can move through the region's key routes.

How long the interruption will last is a point of difference. The U.S. Energy secretary described the closure as a brief matter that would be measured in days rather than weeks, and framed it as a temporary interruption rather than a lasting blow to supply. In futures markets, however, traders continued to price in the possibility of a more prolonged disruption, and prices held their gains.

The closure unfolded amid a broader contest playing out across the Gulf. Iran's allies in the region have been applying pressure on Saudi Arabia on multiple fronts, part of a wider set of tensions that has kept energy markets on edge.

References

1. 1.Reuters — Saudi East-West pipeline closure and oil prices above $106 a barrel
2. 2.Bloomberg — canceled Saudi crude cargoes and reduced Strait of Hormuz traffic
3. 3.U.S. Department of Energy — Energy secretary's characterization of the closure as temporary
4. 4.Financial Times — Gulf tensions and pressure on Saudi Arabia from Iran's regional allies