Asian refiners are not sure yet how the shutdown of the key Saudi East-West oil pipeline to the Red Sea would affect oil loadings at the port of Yanbu.
Saudi Arabia was forced to temporarily shut down the East-West oil pipeline following drone attacks launched from the territory of Iraq close to the Iranian border. The shutdown is a precautionary measure, after the attacks resulted in a number of injuries, the world’s top crude oil exporter said.
The East-West pipeline became Saudi Arabia’s vital oil route to bypass the Strait of Hormuz after the Middle East conflict started and Hormuz was closed to shipping traffic. Thanks to the East-West pipeline, the Kingdom has managed to re-route most of its crude loadings from the western ports in the Persian Gulf to the Red Sea port of Yanbu.
However, the closure of the pipeline has now introduced a major risk to about 4 million barrels per day (bpd) of Saudi crude oil shipments from Yanbu.
Asian refiners have just adapted to longer routes and timelines for receiving Saudi crude, including via the Mediterranean and around Africa due to the Houthi threat in the southern Red Sea and the Bab el-Mandeb Strait.
Now their supply out of Yanbu could be at risk. And Asian refiners have asked Saudi Arabia to provide updates on oil loading schedules at Yanbu.
At least four Asian refiners haven’t received any clarification from Saudi Arabia yet, traders involved in the communication told Bloomberg on Monday. Two of these refiners expect to pick up their cargoes at Yanbu as scheduled, if there is no communication about delays in the coming hours and days, according to Bloomberg’s trade sources, who wished to remain anonymous.
As of early Monday, it wasn’t immediately clear how long the key Saudi pipeline would remain shut, but the market started pricing in a higher risk of disruption to Middle East oil supply, with prices rallying to $108 per barrel Brent in Asian trade.
By Tsvetana Paraskova for Oilprice.com
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