US Energy Secretary Chris Wright told CNBC on Tuesday that Saudi Arabia's East-West pipeline should be back online within days, providing the most definitive timeline yet for the critical energy infrastructure. Speaking on the sidelines of a G20 energy meeting in Houston, Wright said "It's still a detailed assessment, but I think it will be measured in days." He confirmed that Saudi Arabia is taking steps to move more oil out of the Strait of Hormuz with assistance from the U.S. military, as reported by Business Standard. This represents a significant shift from earlier estimates, with regional officials previously telling the Associated Press that repairing damage from the September 10 attack could take three to five weeks. Washington has resisted Saudi requests for direct military intervention beyond intelligence support, according to three sources who spoke to Reuters on Monday.
Saudi Arabia has cut oil shipments to Europe after drone attacks damaged its key export pipeline to the Red Sea, with trade sources telling Reuters that the kingdom informed European customers that some September-loading crude cargoes will be cancelled. Oil trading and shipping sources said on Tuesday that Saudi Arabia had informed European customers that some September-loading crude cargoes will be cancelled and oil loadings at the Red Sea port of Yanbu had been suspended. State oil company Saudi Aramco declined to comment on the cancellations. The cut in Saudi flows through the Red Sea will prompt Saudi Arabia to try to export more oil via the Strait of Hormuz using so-called dark shipments similar to those already used by the United Arab Emirates and Iraq, trading sources said. Such shipments have allowed Gulf oil producers to export 7 million to 9 million barrels per day, which is 30% to 40% of pre-war volumes.
Saudi Arabia's East-West pipeline shutdown after drone attacks could remove up to 4% of global oil supply temporarily, according to latest reports. The 1,200-km pipeline running across the Arabian Peninsula had helped Saudi Arabia to bypass a shipping logjam in the Strait of Hormuz, where Iran maintains a blockade on commercial shipping. Saudi Arabia has been using the East-West pipeline to reroute around 4 million barrels of oil per day to the port of Yanbu on the Red Sea, which is equivalent to around 4% of global oil supply. However, Yanbu currently has enough stocks to maintain exports for only five to seven days, with the pipeline could resume partial pumping sooner while repairs continue, as reported by Reuters. Saudi Arabia will run out of oil stocks for exports if it doesn't restart its major pipeline to the Red Sea within days, according to Saudi oil buyers and traders, with stocks not full and will eventually run out if the East-West pipeline does not resume operations. Since drone attacks forced Saudi Arabia to shut its huge east-west oil pipeline on Friday, Riyadh has not given full details about the extent of the damage or how long the route will stay offline, with sources providing varying estimates for repair timelines.
Iran-backed Houthi forces in Yemen launched fresh attacks on Saudi Arabia on Monday, with the Houthis carrying out a missile and drone attack on the Khamis Mushait military airbase in southern Saudi Arabia, hitting aircraft hangars, radar systems, runways and ammunition depots in retaliation for Saudi strikes in Yemen. This followed attacks on Friday on Saudi Arabia, which Riyadh blamed on Iranian-backed fighters in Iraq, that disrupted the country's East-West pipeline. Gulf Arab states postponed planned discussions with Iran, fuelling concerns that the West Asia conflict could widen and disrupt global oil supplies. Iraq's government has confirmed that attacks on the Saudi East-West pipeline originated from its territory, despite initial denials from local Iran-backed militias. Iraqi Prime Minister Ali al-Zaidi ordered an investigation into the operations command of Maysan province, along the border with Iran, and dismissed the province's commander and the provincial police chief. Iraq dismissed a military commander on Saturday in response to the attack, as reported by Reuters, with security sources indicating a wide-scale operation was underway to pursue perpetrators of the Saudi Arabia pipeline attack.
Supply disruption supported oil prices, with Brent oil futures trading near $108 a barrel and cargo prices in Europe's physical market even higher, with key benchmark dated Brent at $122 per barrel, according to Business Standard. Oil trading and shipping sources said on Tuesday that Saudi Arabia had informed European customers that some September-loading crude cargoes will be cancelled and oil loadings at the Red Sea port of Yanbu had been suspended. Saudi Arabia loaded 22 million barrels of oil across 12 vessels at Ras Tanura/Juaymah in the week of September 7 to 13, as opposed to 6 to 7 vessels per week for the prior three weeks, data from Vortexa showed. Oil prices surged toward $110 amid reports of a prolonged Saudi pipeline outage, with Brent crude trading at more than $105 a barrel Monday, as reported by The Hindu BusinessLine. Oil prices were already rallying before the attack, with the global benchmark moving back above $100 for the first time since July last week, as sliding inventories and rising Chinese buying tightened the market. Brent crude is up more than 75% this year, reflecting the cumulative impact of multiple supply disruptions. The crisis is delivering an inflationary jolt to the global economy as the cost of natural gas and fuels also surge, with diesel futures trading at around $200 a barrel as fuel supplies have been disrupted in both the Middle East and Russia. Refiners are now paying enormous premiums to secure crude as the cost of selling fuels is soaring, with vessel availability also incredibly scarce as they're willing to pay record amounts for ships to carry barrels across the world.
Polish integrated oil firm Orlen PKN.WA was rushing to find crude oil cargoes from the North Sea and further afield to replace disrupted Saudi imports, with five industry sources confirming the search for alternatives. Aramco became Orlen's top supplier in 2022 and now supplies around 40% of its oil, helping wean it off Russian oil but making it reliant on the Saudi producer. Orlen purchased several cargoes of crude oil in spot tenders on Friday and Monday, picking up North Sea grades including Grane, Johan Sverdrup and Johan Castberg, according to sources. It also tendered for grades further afield including U.S. WTI Midland and Kazakh CPC Blend. It issued another tender on Tuesday to buy North Sea or Algerian crude for October delivery and Guyanese crude for November delivery, though results were slow to surface. The Baltic port of Gdansk in Poland received around 160,000 bpd of Saudi crude this year to date, and Lithuania's Butinge received 63,000 bpd, data from analytics firm Kpler showed. Feedstock deliveries to Orlen refineries are proceeding without disruption, the company spokesperson said.
