Drone strikes on Saudi Arabia's East-West pipeline have knocked out flows to the Yanbu export terminal, and Aramco has cut off multiple European refiners as a result. Brent crude has surged near $108 a barrel, while physical cargoes in Europe trade even higher as buyers scramble for replacement supply.
No Saudi crude has left the Yanbu export terminal since September 11. The terminal reportedly holds only about five days' worth of inventory. Saudi Aramco has responded by cutting off crude deliveries to multiple European refining customers after drone strikes damaged the kingdom's East-West pipeline, the artery that bypasses the Strait of Hormuz to feed Yanbu on the Red Sea coast.
Refiners lose September cargoes
At least three European refiners have been notified that their September cargoes are canceled or delayed, with two more potentially set to receive the same news. Poland's Orlen is the most exposed: the refiner depends on Aramco for roughly 40% of the feedstock across its three plants.
European refiners are now racing to secure replacement barrels from the North Sea and the Mediterranean. But the gap between Brent futures and physical cargo prices is already at $14 a barrel, a sign of how tight the market for deliverable crude oil has become. Aramco has rerouted some volumes to Asian buyers through its eastern terminals at Ras Tanura and Juaymah, which remain operational.
The pipeline and the price spike
Known as the Petroline, the East-West pipeline was shut down as a precaution after drone strikes around September 10. Before the attack it carried between 5 and 7 million barrels a day of capacity, though actual throughput ran between 2.6 and 4 million barrels a day. Even at the lower end, pulling that volume from Europe's supply for a month or more is a shock rerouting can't fully absorb.
Brent crude has surged to near $108 a barrel in response. Physical European cargoes tell a sharper story, climbing to around $122 a barrel as refiners compete for scarce spot supply. The attacks have been linked to Iraqi militias, with possible Houthi involvement, and repairs are expected to take three to six weeks.
A test for Europe's energy security
European governments now face higher energy costs passing through to consumers, possible refinery throughput cuts if alternative crude doesn't arrive fast enough, and fresh questions about the continent's energy security. Europe's shift away from Russian oil after 2022 increased its reliance on Middle Eastern suppliers.
Source: Crypto Briefing
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