Damage to the East-West pipeline has put Saudi crude exports under pressure, with Yanbu reportedly holding enough stocks for only five to seven days.
Saudi Arabia oil supply threatened by pipeline damage
The drone attack on the East-West pipeline has renewed concerns over Saudi Arabia oil supply and global crude availability. With the Red Sea route out of service and the Strait of Hormuz already paralysed by the conflict, Riyadh could run out of export stocks in just five to seven days.
Oil prices rose again on Monday, September 14, following the attack that knocked a Saudi pipeline out of service the previous Thursday. In recent months, the pipeline had helped Riyadh partly cushion the impact of the war in Iran and the closure of the Strait of Hormuz.
On September 14, Brent crude was trading at USD 108 per barrel, more than USD 3 above the previous week’s closing price.
Oil losses could reach 4% of global supply
According to buyers and operators in the state oil sector, Saudi Arabia will run out of oil stocks intended for export unless it can restart the pipeline to the Red Sea within a few days. The pipeline was damaged in an attack carried out using drones launched from Iraq.
Failure to restore operations could result in estimated losses of up to 4% of global oil supply.
Satellite images released on Sunday evening suggested that a pumping station on the 1,200 km Saudi East-West pipeline may have suffered severe damage.
A five-to-seven-day safety margin
Higher volumes of oil transported through the Red Sea pipeline during recent months of heightened tensions had enabled Saudi Arabia to cushion the impact of the war and the blockade of Hormuz.
With the pipeline now out of service, however, the western port of Yanbu reportedly has enough stocks to maintain exports for only five to seven days.
The attacks therefore appear to have forced the shutdown of the pipeline, but Riyadh has so far provided no precise details on the extent of the damage or how long the infrastructure will remain out of service.
The Saudi government said the attack was carried out using drones launched by militants based in Iraq. Sources cited by Reuters provided differing estimates. One said repairs could take up to six weeks, while another said the damage could be repaired more quickly and that partial pumping operations could resume while work was still under way.
“The relatively contained price reaction suggests that the market still expects Saudi inventories to cushion exports in the short term. However, if the disruption extends beyond the five-to-seven-day safety margin, the situation could change rapidly,” Rystad Energy analyst Janiv Shah said in a note.
Hopes for a breakthrough in negotiations fade
Without a resumption of operations on the Saudi East-West pipeline, oil stocks risk running out.
At the same time, hopes for a breakthrough in negotiations faded after Oman’s Foreign Minister, Sayyid Badr Albusaidi, said late on Sunday, September 13, that a regional meeting scheduled for Monday had been postponed “in the interest of consensus”.
Iranian officials had said they would attend the meeting with Arab Gulf states to present, together with Oman, an agreement on regulating maritime routes through the Strait of Hormuz.
Houthis seize key locations along the Red Sea coast
The Tehran-backed Houthis have been targeting Saudi oil infrastructure and maritime traffic as part of the naval blockade declared in July.
Within a few days, the Houthis managed to seize several key locations along the Red Sea coast and, apparently, some strategically important islands overlooking the Bab el-Mandeb Strait, from which they could potentially exercise full control over maritime transit.
These advances have brought them closer to the important US military base in Djibouti. The developments are particularly significant for the Horn of Africa because of Djibouti’s position alongside one of the main maritime routes linking the Red Sea and the Indian Ocean.
The Middle East conflict has now entered its seventh month. Yet Trump had said the war would end within four to six weeks.
Nicola Pedde, director of the Institute for Global Studies, wrote: “The conflict in Iran has clearly demonstrated how pushing confrontation towards asymmetry pays off, convincing the Houthis of the possibility, and the necessity, of bringing the threat back towards maritime security in the Red Sea and Saudi energy infrastructure. With the same objective pursued by Iran, built around the intention of producing tangible effects in the energy context, and consequently at the global level.”
Saudi Arabia oil production plunges
In addition, Saudi Arabia oil supply had already fallen in August to its lowest level in 30 years because of reduced flows through Hormuz and the Red Sea, according to the International Energy Agency.
Based on forecasts, global oil supply in 2026 will decline by almost 6%, the IEA said.
Last week, Saudi Arabia reported to OPEC that its state oil production had fallen to just 6.2 million barrels per day in August. Before the war, production stood at 10.9 million barrels per day.
