Saudi Pipeline Outage Puts Global Oil Supply at Risk

The shutdown of Saudi Arabia's major pipeline to the Red Sea due to drone attacks has led to concerns about a potential oil supply shortage. The pipeline, which carries around 4 million barrels per day, is expected to remain offline for several weeks.

Saudi oil buyers and traders have warned that if the pipeline doesn't restart within days, Saudi Arabia will run out of oil stocks for exports, leading to a loss of up to 4% of global supply. This would exacerbate the current global supply crunch, which has pushed fuel prices to record highs and contributed to inflation worldwide.

The shutdown is the latest disruption to the Middle East's oil supplies, following the wartime closure of the Strait of Hormuz that has crippled exports from neighboring countries. Saudi Arabia has been using the pipeline to reroute around 4 million barrels per day to the port of Yanbu on the Red Sea.

The world's biggest exporter has stocks to supply customers for several days from Egypt's ports, but these will ultimately run out without the east-west pipeline resuming operations. Saudi oil production has already fallen to a three-decade low in August due to reduced flows via Hormuz and the Red Sea.