Europe's Energy Crisis Deepens as Saudi Pipeline Shutdown Bites

Saudi Aramco has informed European refinery customers that they will not receive crude oil allocations in October due to an attack on the key pipeline transporting Saudi oil to the Red Sea.

The pipeline, which is approximately 1,200 kilometers long and carries 4-5% of the world's daily oil supply, was shut down on September 11 after being attacked. European refineries generally rely on Saudi Arabia's Yanbu Port to obtain Saudi crude oil via Egypt's Sidi Kerir Port.

The disruption has exposed Europe's vulnerability to energy price shocks and could lead to higher crude oil and refined oil prices as well as a new round of inflationary pressures, according to the European News Channel. If the damage to the pipeline cannot be repaired quickly, Europe may face higher costs or reduced fuel production.

The natural gas shortage has already sent a strong warning signal to the European electricity market ahead of winter, with electricity prices jumping significantly. Mike Wirth, CEO of Chevron, said that the 'buffer' in the oil market is running out, and oil buyers are becoming increasingly vulnerable to soaring prices.