Saudi Arabia relies on its oil reserves to maintain exports following drone attacks that halted the country's East-West pipeline. The Saudi Ministry of Energy announced this shutdown as a precautionary measure after the pipeline was attacked last week in the Riyadh and Medina regions.
Emergency Status and Pipeline Security Review
The ministry stated that emergency and technical teams are securing the pipeline and assessing its condition. Saudi and Iraqi officials reported that the drone attack originated from Iraq. However, the Saudi Ministry of Energy has not announced a date for the resumption of oil pumping and has not provided a full report on the damages incurred.
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Saudi oil buyers and traders have estimated that a prolonged shutdown could jeopardize about 4 million barrels per day, equivalent to about 4 percent of global oil supply. They estimate that the oil stored at the Red Sea port of Yanbu could sustain exports for five to seven days. Saudi officials have not yet confirmed these estimates.
Impact on Deliveries to Europe and Asia
The impact of the shutdown on deliveries depends on the speed of resuming pumping and the amount of stored oil. Brent crude futures prices rose about 3 percent in early trading on Monday following further attacks on energy and shipping facilities in the Middle East.
The approximately 1,200-kilometer pipeline transports oil from eastern Saudi Arabia to Yanbu on the western coast, allowing exports to occur via the Red Sea without passing through the Strait of Hormuz. Aramco announced in May that it had increased pumping through this pipeline to a maximum capacity of 7 million barrels per day in the first quarter of this year.
This pipeline also supplies oil to refineries on the western coast of Saudi Arabia, so its capacity does not equal the amount of exports. The pipeline shutdown does not immediately mean a reduction in global oil supply by 7 million barrels per day, but tankers can still load stored oil near the export terminals.
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