Saudi Arabia will suspend oil deliveries to European refineries in October after a drone attack damaged the East-West pipeline, the main route through which Saudi oil reaches the Red Sea without passing through the Strait of Hormuz.
The decision forces European refineries to quickly seek alternative sources of supply. The Polish company Orlen has already secured 16 additional oil shipments from Norway, the UK, Algeria, Kazakhstan, and Azerbaijan for its refineries in Poland, Lithuania, and the Czech Republic.
Saudi Aramco has informed at least two European clients that it will not supply them with oil next month, but this measure applies to all buyers on the continent who receive Saudi oil under long-term contracts, according to Bloomberg.
These contracts guarantee refineries a steady volume of oil each month. The suspension of deliveries forces companies to quickly purchase the missing quantities from the market, where prices and transport costs can vary significantly.
The pipeline bypassing the Strait of Hormuz
The East-West pipeline crosses Saudi Arabia for about 1,200 kilometers, from the Persian Gulf area to the port of Yanbu on the Red Sea. Three pumping stations were damaged in the attack, and the pipeline was shut down.
The route is essential for Saudi exports as it allows the transportation of oil to the Red Sea without crossing the Strait of Hormuz. The pipeline has been crucial in the last six months as Saudi Arabia has been able to continue exporting oil without using the Strait of Hormuz.
Prior to the attack, about four to five million barrels of oil per day were transported through the East-West pipeline, equivalent to 4-5% of global consumption.
The pipeline is expected to be partially operational in the coming days, but full repairs could take about six weeks, according to sources cited by Bloomberg.
The oil destined for European customers is usually loaded from the Egyptian port of Sidi Kerir in the Mediterranean Sea. It is connected by pipeline to the ports on the Red Sea where Saudi oil arrives.
The European member countries of the Organization for Economic Cooperation and Development imported around 577,000 barrels of Saudi oil per day in June, according to the International Energy Agency.
Saudi Arabia sends more oil to Asia
Meanwhile, Saudi Aramco is trying to limit losses by increasing exports from the Ras Tanura port in the Persian Gulf. The oil crosses the Strait of Hormuz and is transferred from one ship to another at the Sohar port in Oman.
The company has sold about 60 million barrels for delivery in September and October through this route, as reported by Reuters.
Saudi exports from the Gulf have thus reached an average of one to 1.5 million barrels per day. The main buyers are refineries in China and South Korea, and some volumes will reach India and Japan.
The increase in these deliveries has helped temper international oil prices and partially offset the quantities lost through the Yanbu port. Futures contracts fell by over a dollar per barrel on Friday after reports that Saudi Arabia could recover about half of the East-West pipeline capacity in a few days.
European refineries now need to quickly find alternative sources to replace the Saudi oil that was supposed to arrive in October.
G.P.