Chinese oil prices reach record highs after Saudi pipeline attacks

Chinese crude oil futures just hit a price nobody wanted to see. On September 15, yuan-denominated crude on the Shanghai International Energy Exchange surged to 929.4 yuan, roughly $138.50 per barrel. That’s the highest level since the contract launched in March 2018.

The catalyst: a series of drone attacks on Saudi Arabia’s East-West pipeline. The pipeline was moving approximately 4 million barrels per day, which accounts for about 4% of global oil supply.

What happened to the pipeline

On September 10 and 11, drone strikes attributed to Iran-aligned militias operating out of Iraq hit the East-West pipeline in multiple locations. The damage was severe enough that Saudi Arabia temporarily halted operations on the entire route.

Repair estimates put the timeline at four to six weeks.

The East-West pipeline had become even more critical in recent months because it offered an alternative export route that bypasses the Strait of Hormuz. With US-Iran tensions already making that narrow waterway a risk zone for tanker traffic, Saudi crude was being rerouted through the pipeline to Red Sea terminals instead. Knocking it offline eliminated the workaround.

Global benchmarks feel the heat

Brent crude climbed to approximately $107 to $108 per barrel in mid-September. Oman and Murban benchmarks, which are more closely tied to Middle Eastern physical cargoes, were trading above $126 per barrel.

Chinese refiners, the world’s largest crude oil importers, have been purchasing oil at elevated premiums to secure supply amid the disruptions. Immediate import volumes into China weren’t drastically affected, at least not yet.

Why the Shanghai contract matters

China imports more crude oil than any other country, and the Shanghai contract prices oil in yuan, giving it a direct connection to the world’s largest import market.

When Chinese futures hit a record high, it reflects real purchasing pressure from refiners who process roughly 14 million barrels per day.

What this means for markets

The immediate question is whether Saudi Arabia can restore pipeline operations within the estimated four to six week window. Four million barrels per day is not a volume the market can easily replace.

Analysts note that sustained high prices could create medium-term demand pressure in China. Refiners operating with razor-thin margins will eventually cut throughput if input costs stay elevated.

The Oman and Murban premiums above $126 per barrel, compared to Brent near $108, represent an unusually wide differential.

If the attacks are confirmed as originating from Iraq, it raises questions about security along the entire length of Saudi Arabia’s pipeline network, not just the sections closest to Yemen or the Houthi-controlled areas that have been the traditional threat vector.