Saudi Arabia has begun drawing on stored crude to keep its exports moving after drone strikes forced the closure of its main pipeline to the Red Sea, putting deliveries to European and Asian refiners at risk.
The kingdom’s energy ministry announced the shutdown of the East-West pipeline on September 11 as a precaution, a day after the line was hit in the Riyadh and Medina regions. It said technical teams were working to secure the pipeline and assess its safety.
Saudi and Iraqi authorities have said the drones were launched from Iraqi territory. No group has claimed responsibility and the ministry has not said when pumping would resume or set out the extent of the damage.
The 1,200km line, known as Petroline, carries crude from the eastern oilfields to the port of Yanbu, allowing tankers to load without passing through the Strait of Hormuz. Aramco said in May that it had pushed the line to its maximum capacity of 7 million barrels a day during the first quarter.
Saudi buyers and traders quoted in reports published on September 13 estimated that a prolonged stoppage could put about 4 million barrels a day at risk, close to 4 per cent of world supply. They put the crude held at Yanbu at five to seven days of exports, a figure Saudi officials have not confirmed.
Markets moved quickly. Brent crude rose more than 3 per cent on September 14 to above $108 (€93) a barrel, a day after a merchant vessel was struck in the Strait of Hormuz, killing one crew member.
Cargoes leaving Yanbu for Europe can sail north through the Red Sea towards the Suez Canal, or cross to the Mediterranean through Egypt’s SUMED pipeline. The route to Asia runs south through Bab el-Mandeb, where Yemen’s Houthis have seized Perim island and stretches of the Yemeni Red Sea coast.
The International Energy Agency (IEA) said in its September oil market report that global observed stocks had fallen by 507 million barrels since the war began on February 28, including 95 million barrels in August alone. It put Gulf exports at around 13 million barrels a day in August, close to half their pre-war level, and reported sharply higher diesel prices in Europe and Asia.
The European Commission has estimated that the earlier closure of Hormuz added some €13 billion to the bloc’s fossil fuel import bill at the height of the crisis. European Union rules require member states to hold oil stocks equivalent to 90 days of net imports, without distinguishing between fuel types.
