Drone Attack on Saudi Pipeline Threatens Global Oil Supply

Saudi Arabia is facing a critical oil supply shortage after a drone attack forced its east-west pipeline to shut down, leaving up to 4% of global oil supply at risk. The pipeline, which has been rerouting about 4-million barrels per day (bpd) to the port of Yanbu on the Red Sea, will take several days to repair and may be offline for five to six weeks.

The attack has already pushed global fuel prices to record highs and worsened the global supply crunch. The International Energy Agency (IEA) reported that world oil supply will decline this year by 5.7-million barrels, or about 6%. Saudi Arabia's oil production had dropped to 6.2-million bpd in August from 10.9-million bpd in February.

Without the pipeline resuming operations, Yanbu storage capacity stands at about 35-million barrels and Ain Sukhna and Sidi Kerir can store 18-million and 20-million barrels respectively. Stocks are not full and will ultimately run out without the east-west pipeline resuming operations, according to industry sources.