Houthi drone attack: Saudi oil stocks could run dry within days if key pipeline remains shut
Saudi Arabia could run out of oil stocks for export within days if it fails to restart a major pipeline hit by drone attacks. The damage also threatens to remove up to 4% of global oil supply from the market, Saudi oil buyers and traders said.The kingdom has enough crude at the Red Sea port of Yanbu to maintain exports for only five to seven days, news agency Reuters reported, citing three industry sources familiar with Saudi shipments. The stocks could eventually run out if the pipeline remains offline.The east-west pipeline was shut on Friday after drone attacks damaged the route. It carries Saudi crude from the country’s oil fields in the east to Yanbu on the Red Sea.Saudi Arabia has not said how badly the pipeline was damaged or when it could restart.The timeline of the report could vary, according to the sources cited in the report. While one stated the repairs could take five to six weeks, another said the pipeline could be repaired sooner. It may also resume pumping partially while repairs continue.Saudi Arabia’s government media office and energy ministry did not immediately respond to Reuters’ requests for comment.
Saudi faces a growing supply problem
The pipeline has become vital to Saudi Arabia during the war. For the past six months, it has allowed the world’s biggest oil exporter to bypass the disruption in the Strait of Hormuz.Saudi Arabia has used the route to move around 4 million barrels of oil per day to Yanbu. That is roughly 4% of global oil supply.The pipeline’s shutdown now threatens that alternative route.Saudi Arabia has some additional stocks at Egyptian ports. These include Ain Sukhna on the Red Sea and Sidi Kerir on the Mediterranean.A fourth industry source said these stocks could supply customers for several more days.Yanbu has an estimated storage capacity of around 35 million barrels. Ain Sukhna can hold about 18 million barrels, while Sidi Kerir has capacity for around 20 million barrels.But the storage facilities are not full. The four sources said the stocks will eventually run out unless the east-west pipeline resumes operations.
Saudi oil production already at 30-year low
The latest disruption comes after a sharp fall in Saudi oil production.Saudi Arabia told OPEC that its output fell to 6.2 million barrels per day in August. That was down from 10.9 million bpd in February, before the war began.The International Energy Agency said on Friday that Saudi oil supply had fallen to its lowest level in more than three decades.It cited reduced flows through the Strait of Hormuz and the Red Sea.The IEA expects global oil supply to fall by 5.7 million bpd this year. That is about 6% of global supply.The Middle East supplied around 22 million bpd of oil before the war. Flows through the Strait of Hormuz have since fallen to between 6 million and 9 million bpd, according to industry sources.The disruption has already pushed global fuel prices to record highs. It has also fuelled inflation and sent US bond yields to their highest levels since the 2008 financial crisis.
More pressure on Saudi oil routes
Saudi Arabia is also facing fresh risks around the Red Sea.Houthi fighters in Yemen have threatened Saudi oil shipments during the war. On Friday, they seized an island at the mouth of the Red Sea.The east-west pipeline had given Saudi Arabia a crucial way to avoid the Strait of Hormuz. Its continued shutdown could leave the kingdom increasingly dependent on stored oil and other export routes.If the pipeline takes weeks to repair, Saudi Arabia could struggle to maintain its overseas supplies.A prolonged shutdown could therefore remove millions of barrels of Saudi crude from global markets. That would further tighten supplies and add to pressure on already elevated oil prices.
