Oil prices have turned lower as Saudi Arabia moves to restart crude flows through a critical pipeline, while mounting signs suggest diplomatic efforts are intensifying to reopen the Strait of Hormuz. According to a person familiar with the matter, the kingdom is testing the pipeline with the aim of resuming operations later this week. Brent crude briefly dipped below $98 per barrel.
The same source indicated that Saudi Arabia also expects to resume crude loadings at the Red Sea port of Yanbu this week. The East-West pipeline, which boasts a maximum capacity of 7 million barrels per day, served as a vital alternative route bypassing the Strait of Hormuz before it was shut down by a drone attack earlier this month.
Oil had already declined earlier in the session following a Kyodo News report citing an unnamed senior Iranian official, which claimed Tehran proposed reopening the Strait of Hormuz within seven days if the U.S. lifted its blockade, offering this as a foundation for negotiations with mediating nations at the United Nations. Iran's Islamic Revolutionary Guard Corps also stated that talks must proceed if they align with national interests.
U.S. President Donald Trump is scheduled to address the United Nations General Assembly in New York later Tuesday, with the possibility of a meeting with Iranian President Masoud Pezeshkian during the gathering.
According to insiders, Saudi Arabia is in the early stages of reactivating a major pipeline that enables the kingdom to transport crude without transiting the Strait of Hormuz, but which halted operations earlier this month. One of the sources said the objective is to resume exports through this route by the latter part of the week. Both individuals requested anonymity as the information has not been publicly disclosed.
Multiple oil traders reported early indications that tankers are arriving at Yanbu port, where crude transported via the pipeline is loaded for export. Saudi Aramco and the Saudi energy ministry did not respond to requests for comment.
Once the East-West pipeline is back online, Saudi Aramco will regain the ability to export crude from the Red Sea terminal at Yanbu. With transit through the Strait of Hormuz still severely disrupted, Saudi Arabia has been shipping the majority of its crude via Yanbu throughout the conflict. However, this route carries ongoing risks, as Yemen-based Houthi militants continue to target Saudi infrastructure.
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