Saudi Arabia is working to resume approximately half the capacity of its critical East-West oil pipeline within days. This pipeline was halted last week due to drone attacks. State-run Saudi Aramco is implementing a strategy to bypass a damaged section of the route to facilitate partial resumption of capacity. The company anticipates restoring the conduit to its full operational capability within approximately six weeks.
The East-West pipeline, which spans 1,200 kilometers across the Arabian Peninsula, has a capacity of 7 million barrels per day. Its shutdown on September 10th, following attacks by militias from Iraq and potential threats from Yemen-based Houthi militants, significantly impacted oil markets. The pipeline is crucial for Saudi Arabia as it enables oil exports from its Red Sea coast, bypassing the Strait of Hormuz, which has experienced disruptions during the ongoing war with Iran. The halt put millions of barrels a day of exports at risk, contributing to crude prices exceeding $107 in London.
Following the pipeline's shutdown, Saudi Aramco has increased oil sales from outside the Strait of Hormuz to offset some of the lost export volumes. The company has reportedly sold about 20 million barrels to Asian refiners, including those in China, for September and October pickup. However, customers in Europe are facing delays, leading to an increase in regional crude prices and prompting some refiners, such as Poland's Orlen SA, to purchase replacement cargoes from other sources. The news of the pipeline's partial restoration contributed to oil extending its slump, with West Texas Intermediate falling towards $102 a barrel and Brent closing below $106.
