The Saudi East-West oil pipeline has signaled its restart, with Yanbu port expected to resume crude oil exports as early as this week.

The signal that Saudi Arabia's East-West oil pipeline will be restarted, coupled with the expectation of diplomatic détente from the Iranian president at the UN General Assembly, is jointly suppressing the geopolitical risk premium that had previously risen sharply due to supply disruptions in the Middle East.

On Tuesday, Bloomberg, citing sources familiar with the matter, reported that Saudi Arabia is in the early stages of restarting the East-West oil pipeline, with the goal of resuming crude oil exports via the port of Yanbu later this week.

Following the news, Brent crude oil continued its decline on Tuesday, falling below the $100 per barrel mark. Meanwhile, according to CCTV International News, Iranian President Pezechzian flew from Tehran to New York today (September 22) to attend the High-Level Week activities of the 81st UN General Assembly. He is expected to address the General Assembly's general debate on the morning of September 23 local time, which is tomorrow evening Beijing time.

The convergence of these two trends signals a temporary shift in market sentiment. However, analysts warn that the progress of pipeline restoration remains uncertain, the feasibility of substantial progress in US-Iran negotiations is still undecided, and the sustainability of the geopolitical risk premium remains to be seen.

Pipeline Restart: A Key Route from Hormuz to the Red Sea

The East-West oil pipeline is a core infrastructure project for Saudi Arabia to bypass the Strait of Hormuz and transport crude oil to the port of Yanbu on the Red Sea. On September 10, the pipeline was attacked by drones from Iraq, damaging pumping stations and forcing Saudi Aramco to urgently switch its exports back to the Persian Gulf. Recently, a large number of oil tankers have been loading at the Ras Tanura terminal.

According to Bloomberg, Saudi Aramco has been racing against time to bypass the damaged pumping stations to partially restore pipeline flow and aims to return the pipeline to full capacity within about six weeks. Several oil traders indicated that there are signs of tankers arriving at Yanbu port, an early indication that the pipeline is about to restart. Neither Saudi Aramco nor the Saudi Ministry of Energy responded to requests for comment.

The impact of the pipeline closure has been fully felt in the market. According to sources, Saudi Aramco has notified at least two European refiners that they will be unable to fulfill their crude oil quotas under long-term agreements in October. Polish national oil company Orlen SA immediately sought alternative sources in the market, driving European oil prices sharply higher—the European physical benchmark Dated Brent briefly broke through $130 per barrel.

Premium write-off under dual pressure: sustainability in doubt

The combined effect of pipeline restarts and expectations of diplomatic easing has simultaneously suppressed oil prices from both the supply side and risk expectations. Brent crude falling below $100 reflects the market's rapid pricing in a narrowing short-term supply gap.

However, the risks have not disappeared. The Houthi rebels in Yemen continue to launch attacks on Saudi infrastructure, and the Red Sea shipping lanes, where Yanbu port is located, remain under security threat. The actual speed of pipeline restoration will depend on Saudi Aramco's progress in repairing the damaged pumping stations, a process fraught with uncertainty.

Analysts point out that if pipeline restoration falls short of expectations, or if US-Iran negotiations fail to achieve a substantial breakthrough during the UN General Assembly, the geopolitical risk premium could potentially return. The current decline in oil prices reflects more of an improved outlook than a fundamental shift in the supply structure, and investors need to remain vigilant about potential recurring events.

Risk Warning and DisclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.