Saudi Pipeline Shutdown Threatens Global Oil Supplies
The temporary shutdown of Saudi Arabia's East-West Pipeline could significantly impact the Kingdom's crude oil exports, according to Fitch Solutions' Emma Richards. Prior to the attack, Saudi Arabia was exporting around 4 million barrels per day (b/d) via Yanbu on the Red Sea, and all of that was being fed by the East-West Pipeline.
The shutdown could squeeze the Kingdom's Red Sea exports, which exceeded 5 million b/d at their peak. If the pipeline outage is sustained, Aramco may increase exports through its Gulf terminals and via the Strait of Hormuz, but this route is still insecure due to ongoing security threats.
Red Sea oil exports have been high because Aramco had rerouted volumes away from the Strait of Hormuz earlier in the conflict. However, spare production capacity outside of the Middle East is extremely limited, and what little there is has likely already been exhausted this year.
The buffers that helped keep prices in check earlier this year are being eroded, leaving the market tighter and more precariously positioned heading into Q4. Price pressures are building across markets for crude oil and refined fuels, and Brent could top the highs it reached earlier in the conflict next quarter.