Saudi Arabia risks losing up to 4% of global oil supply after drone attacks forced it to shut its main east-west pipeline, with Red Sea export stocks now down to just days of cover. The disruption compounds an already-squeezed Strait of Hormuz and comes as new reports of a shipping attack there emerged over the weekend.
Pipeline shutdown threatens Red Sea exports
Saudi Arabia will run out of oil stocks for export if it cannot restart its east-west pipeline within days, threatening a loss of up to 4% of global supply, oil buyers and traders told Reuters. Drone attacks forced Riyadh to shut the line, and estimates of repair time vary sharply: one source told Reuters the damage could take five to six weeks to fix, while another said the pipeline could resume pumping partially sooner.
The 1,200-km (745-mile) pipeline has carried 4 million to 5 million barrels per day to the Red Sea port of Yanbu. It has spared Saudi Arabia the brunt of the wartime shutdown of the Strait of Hormuz for the past six months. Yanbu now has stocks to maintain exports for only five to seven days, and Saudi Arabia also has stocks to supply customers for several days from Egypt's ports of Ain Sukhna and Sidi Kerir, a fourth source said.
Hormuz attack adds to the strain
The squeeze comes as Saudi oil supply already fell to a more than three-decade low in August, according to the International Energy Agency, which expects world oil supply to decline this year by 5.7 million bpd, about 6%. Compounding the pressure, maritime trackers reported a new attack on a vessel in the Strait of Hormuz on Sunday, with the crew evacuated after a fire broke out. Brent crude surged back above $100 a barrel over the past week amid the escalation.
Iraq launches investigation
No group has claimed responsibility for the pipeline attack, but Saudi Arabia and Baghdad said it originated in Iraq, where Iranian-backed militias operate. According to the Financial Times: Iraqi prime minister Ali al-Zaidi's office said it was "mounting an 'urgent investigation'" and sacked the military commander of Maysan province, where the drones were launched. Analysts say curbing the influence of Tehran-aligned factions in Iraq remains a near-impossible task in the short term.
The Houthis in Yemen have separately threatened Saudi oil shipments and seized an island in the mouth of the Red Sea on Friday.
Sources: Commodities & Futures News, Commodities & Futures News, Financial Times
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