Saudi East-West pipeline resumes exports at 3.5 million barrels daily

Summary

• Saudi Arabia restarted oil exports through the repaired East-West pipeline, people with direct knowledge told Bloomberg
• Drone strikes this month halted the line, forcing heavier reliance on the Strait of Hormuz
• Restored flows ease supply pressure on buyers cut from allocations, with Brent near $107

The latest

Oil is again moving through Saudi Arabia's East-West pipeline at roughly 3.5 million barrels a day after repairs to damage from drone strikes earlier this month, two people with direct knowledge told Bloomberg. The restart hands the kingdom back its alternative export route around the Strait of Hormuz. Aramco and the energy ministry did not immediately respond to requests for comment.

Details

• The line: The East-West pipeline carries crude across the kingdom from the eastern oil fields to Yanbu on the Red Sea, bypassing the Strait of Hormuz. Total capacity is about 7 million barrels a day, according to Bloomberg, leaving current flows of roughly 3.5 million at half of what the link can physically move.
• How it splits: Around 5 million barrels a day of that capacity is typically earmarked for exports, Bloomberg reported. Roughly 2 million barrels a day generally feeds refineries along the kingdom's west coast, with the remainder available for shipment abroad from Yanbu.
• The damage: The pipeline was knocked out by drone strikes earlier this month. A person familiar with the matter said at the time that a full resumption could take about six weeks, a timeline the restart of flows now runs ahead of, though the line is not yet back at full throughput.
• Hormuz workaround: With the western route down, Saudi Arabia pushed shipments through the Strait of Hormuz instead, lifting total oil exports to a war-time high of more than 5 million barrels a day in September, according to Bloomberg. Most of those cargoes headed to Asia.
• Buyer squeeze: The resumption brings relief to customers who have been pressing for barrels. Some buyers in Europe were told they will not be allocated any crude next month under term contracts, Bloomberg reported, an unusually blunt signal of how tight Saudi supply had become.
• Houthi threat: The Red Sea route along the kingdom's western border has come under threat from Yemen's Houthi militants, who stepped up attacks this month on energy infrastructure in southwestern Saudi Arabia and at Yanbu, the port where the East-West line terminates.
• The price: Oil in London was trading near $107 a barrel on Monday, a level that reflects the risk premium built up around Gulf export infrastructure during the Iran war and the interruption of the kingdom's overland route.
• No official word: Neither Aramco nor the Saudi energy ministry has confirmed the restart or given a figure for current throughput. The company has not published a timeline for returning the line to full capacity, leaving the pace of recovery described only by people with direct knowledge.

Background

The East-West pipeline is Saudi Arabia's principal hedge against disruption at the Strait of Hormuz, the chokepoint handling most Gulf crude. Its Red Sea terminus at Yanbu gives the kingdom an outlet to European and Mediterranean buyers without transiting the strait.

Between the lines

Both of the kingdom's export routes now carry risk at once. Hormuz is exposed to the Iran war, while Yanbu and southwestern infrastructure are being targeted by Houthi attacks that intensified this month. Running the pipeline at half capacity while Hormuz shipments sit at a war-time high suggests Riyadh is spreading volumes across two vulnerable corridors rather than committing to either.

What's next

Watch whether flows climb toward the 5 million barrels a day earmarked for exports, whether European term customers are restored to allocations next month, and whether Houthi strikes resume against Yanbu or southwestern energy sites.

Source: Bloomberg — Anthony Di Paola