Saudi Aramco reportedly informed at least two European oil refinery customers that they will not be allocated crude oil next month following the attack on the kingdom’s key pipeline to the Red Sea.
This was revealed by sources close to Bloomberg agency who indicated that European customers usually receive Saudi crude through fixed-term contracts, which guarantee a steady supply each month.
The sources, who preferred to remain anonymous since the information is not public, indicated that these deliveries will not be made next month. The decision affects all European buyers.
European refineries usually extract Saudi crude from the Egyptian port of Sidi Kerir, on the Mediterranean, which is connected to the Red Sea by a pipeline.
The pipeline disruption caused panic buying among some Aramco customers. The Polish company Orlen SA issued more than ten tenders since Friday in a race to secure alternative supplies.
According to the Monthly Oil Market Report from the International Energy Agency, OECD European countries imported 577,000 barrels per day of crude from Saudi Arabia in June.
Global oil supply has been affected for months by the stalemate in negotiations for the reopening of the Strait of Hormuz. Now, the market faces another setback: the closure of Saudi Arabia’s East-West pipeline.
The pipeline has been a key relief valve for the world’s largest crude exporter, allowing it to bypass the blockade at Hormuz and maintain the flow of its oil shipments from the Red Sea.
However, the kingdom closed the pipeline in mid-September after it was damaged by drone attacks launched from Iraq, where militias backed by Iran operate. This has worsened threats to Saudi Arabia’s energy assets and Red Sea exports, in a context of intensified attacks by Yemen’s Houthi rebels.
The disruption of flow through the East-West pipeline shook a market already clamoring for supply. Since then, oil prices have trimmed some of their gains, although they remain around $100 per barrel, given the possibility that some volumes will be restored in the short term.
State-owned Saudi Aramco seeks to restore the pipeline to approximately half its capacity within days and reach full capacity in about six weeks, according to a source close to the matter.
The 1,200-kilometer pipeline crosses the Arabian Peninsula, connecting Saudi Arabia’s huge oil fields in the east of the country with the port of Yanbu on the Red Sea.
It begins near sea level in Abqaiq, where the world’s largest crude processing plant is located, treating oil extracted from fields such as the nearby supergiant Ghawar. Then, the pipeline crosses deserts at more than 1000 meters altitude as it crosses the Hiyaz mountains before reaching the western coast.
About 2 million barrels per day of crude transported by the pipeline are used in the domestic market, mainly by refineries along the Red Sea.
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