Oil prices slide as surprise US stockpile build offsets Saudi supply panic

Oil prices fell on Wednesday as a surprise jump in US crude stockpiles took the steam out of a market recently rattled by attacks on Saudi energy infrastructure.

Brent crude futures slid about 1% to settle around $107.64 a barrel, while US West Texas Intermediate fell to $104.46. Both benchmarks had surged the previous day to their highest levels since mid-May, driven by fears that a Houthi rebel attack on a major Saudi pipeline would choke off global supplies.

Inside the US stockpile surge

The downward pressure came from the American Petroleum Institute, which reported that US crude inventories jumped by 7.1 million barrels in the week ending 11 September. Market analysts had expected a drop of about 1.6 million barrels. The build in gasoline and distillate stockpiles further eased immediate worries about tight supplies, giving traders room to catch their breath.

The Saudi pipeline shutdown

Still, the market remains on edge. Saudi Arabia shut its East-West pipeline over the weekend following a Friday drone or missile strike by Yemen's Iran-aligned Houthis. The closure forced the kingdom to suspend loadings at the Yanbu export terminal on the Red Sea and scale back some shipments to European buyers.

Conflicting accounts of how long the pipeline will remain offline have kept traders guessing. US Energy Secretary Chris Wright told CNBC that the disruption is brief and should resolve in "days".

But industry experts are more pessimistic. Andy Lipow, president of Lipow Oil Associates, warned that online images suggest repairs could take months. Other industry sources estimate five to six weeks, though partial pumping could resume sooner.

Supply routes under pressure

The pipeline is a critical safety valve for global energy markets, designed to bypass the volatile Persian Gulf by carrying 4 million barrels a day — about 4% of global supply — to the Red Sea.

Its closure comes as shipping through the Strait of Hormuz is already slowing. Transit through the strait dropped to fewer than 10 vessels a day over the weekend, down from its recent 10-day average of 14, amid the ongoing war between the US, Israel, and Iran. That war has cost the US Pentagon an estimated $38.1 billion through 1 August, according to the Congressional Budget Office.

Adding to the geopolitical noise, Libya's National Oil Corporation had to halt production at three oilfields after protesters closed a valve on the Hamada-Zawiya pipeline. However, NOC Chairman Massoud Suleman said the country's output remains steady at about 1.4 million barrels a day.

For now, the unexpected cushion of American crude is keeping a lid on prices, but any signs of a prolonged Saudi outage or wider Gulf escalation could quickly reverse the trend.