Saudi Arabia's East-West Pipeline Shutdown Threatens Global Oil Markets

Saudi Arabia's East-West pipeline has been shut down due to damage from drone attacks on September 11. The pipeline, also known as Petroline, carries crude oil from eastern Saudi fields across the kingdom to the Red Sea port of Yanbu, bypassing the Strait of Hormuz. It has a maximum capacity of about 7 million barrels per day (bpd), allowing Saudi Arabia to move oil to the Red Sea without going through the strait.

The pipeline's shutdown is significant because it was one of the kingdom's main alternatives for bypassing the Strait of Hormuz, which has been disrupted by conflict in the Middle East. The disruption has raised questions about what happens if Saudi Arabia's main alternative to Hormuz remains unavailable and what that could mean for global oil markets, particularly in Asia.

Saudi Arabia had increased the amount of crude sent west through the pipeline to about 4 million bpd from roughly 973,000 bpd a year earlier. That accounts for about 4 per cent of the global supply. The longer the shutdown lasts, the harder it becomes for Saudi Arabia to maintain those flows without finding alternative routes or cutting exports.

Riyadh is now looking at other ways of moving crude, including offering additional crude cargoes to Asian refiners using ship-to-ship transfers off Oman's Sohar port and potentially sending more oil through Hormuz. However, this would be challenging given the security situation in the strait.