Earlier, Zero Hedge cited reports that a Saudi oil pipeline had exploded—both from Iranian Press TV as well as a blog titled The Arab Digest.

Immediately following Zero Hedge's report, the price of oil shot upwards, hitting $110 per barrel momentarily. That's the highest price of crude since May 4, 2011.


We think the reason that this headline had such an impact on markets is because the report that's generally being cited—that from The Arab Digest—suggests that the explosion is related to the Arab Spring protests:

For the first time in decades, the Eastern Saudi Arabian volatile situation has reached the vital oil sector. A pipeline between Awamiya and Safwa has been reportedly targeted, and is under fire; the Saudi government sources were quick to claim that the fire is one kilometer away from the pipeline. Our correspondent in Qatif confirmed that it is indeed a pipeline area that is targeted. 

Saudi Arabia's Shiite minority, mostly residing in the oil rich east, has been protesting for years against State sponsored discrimination. They are treated as second class citizens, denied public sector jobs, and vital development for their oil rich areas. Saudi Arabia's powerful Wahhabi religious establishment considers Shiites heretics, and constantly incites against them.
Around 4PM, Saudi officials denied reports of the explosion, according to Dow Jones. That appeared to still the rise in prices.


Nonetheless, concerns remain about Saudi officials' motives for the denials, and given the country's tight control of the media there may be reason to dispute their statements.
Here are photos from The Arab Digest, reportedly showing the pipeline on fire. The blog says these photos come from their correspondent based in Qatif.
saudi oil pipeline on fire
This photo evidently shows the pipeline on fire.
saudi arabia oil pipeline on fire

Another photo from The Arab Digest's Qatif correspondent, reportedly showing the pipeline on fire

According to the blog, a violent outbreak would make sense because "the pipeline is located between Awamiya and Safwa, both areas [have] demonstrated in the past two days." The author elaborates:

The Arab Digest correspondent also said that "the region where the Awamiya oil field is located is called alrams, it is an agricultural land. Senior Saudi royal family members stole acres of this land, especially the late crown prince Sultan Ben Abdul Aziz. After stealing the land, and following local anger, he offered to sell it to them again for a high price. People still remember this incident very well. Recently, the government has made plans to destroy the natural landscape of this region, but the locals are protesting against this." The Saudi government has been trying through resettlement plans to change the demographics of the Eastern region, where Shiites remain a majority.

The Arab Digest provides a map of Saudi Arabia's oil fields:

saudi arabia oil fields

Then again, you can't exactly see the pipeline in these images—and we have just the blog to confirm that this is, indeed, the Qatif region of Saudi Arabia—so we are forced to take them with a grain of salt.
Read the full blog post from The Arab Digest here >