On September 10 local time, Saudi Arabia’s East-West oil pipeline came under a drone attack in the Riyadh and Medina areas, causing some injuries and damage to facilities. The Saudi Ministry of Energy immediately implemented a precautionary shutdown of the pipeline, and emergency and technical teams have begun repair work.
The Pipeline Is the Only Export Route Bypassing Hormuz
The East-West oil pipeline is about 1,200 kilometers long, running from Yanbu Port on the Red Sea coast in the west to the oil-producing region in the Persian Gulf in the east. It has a designed maximum daily throughput of up to 7 million barrels of crude oil, of which about 5 million barrels are for export. Against the backdrop of the Strait of Hormuz being nearly shut down due to the U.S.-Iran conflict, this pipeline has become Saudi Arabia’s primary alternative route for maintaining crude oil exports. Saudi Aramco CEO Amin Nasser previously said that the pipeline’s role in mitigating the impact of a Strait of Hormuz closure is more critical than releasing strategic petroleum reserves.
Yanbu Port Inventories Only Enough for One Week; Repairs May Take Five to Six Weeks
The pipeline had previously transported about 4 million barrels of crude oil per day to Yanbu, accounting for about 4% of global supply. Currently, crude oil inventories at Yanbu can sustain exports for only five to seven days. Reports say pipeline repairs may take five to six weeks. This means the global crude oil market will continue to face a supply gap of about 4 million barrels per day for the next several weeks.
International Oil Prices Surge in Response
Affected by news of the pipeline shutdown, international oil prices rose sharply. During Asian trading on September 14, Brent crude futures broke through $108 per barrel, up 3.37% intraday, after gaining nearly 9% cumulatively the previous week. WTI crude futures approached $103 per barrel. European natural gas prices also moved higher in tandem. According to analyst assessments, if the repair timeline remains unclear, oil prices could rise further to $120 per barrel in the short term.
Impact on Chemical Feedstock Supply
Of the roughly 4 million barrels per day exported from Yanbu, a considerable portion goes to refineries in Asia and Europe. As the pipeline repair period lengthens, refining and chemical enterprises dependent on Saudi crude oil will face feedstock shortages and be forced to seek alternative sources or reduce operating rates. With the Strait of Hormuz not yet reopened to shipping, the global refining and chemical industry will find it difficult to secure sufficient alternative supply in the short term, and feedstock supply for basic chemicals such as ethylene, propylene, and aromatics may tighten further.
