Saudi Arabia has successfully restarted its critical East-West Pipeline (also known as Petroline) and resumed crude oil exports from its Red Sea port of Yanbu. This restart comes less than two weeks after drone attacks, launched from Iraq by Iran-backed militias, forced the pipeline's shutdown on September 11 and 13. The pipeline's resumption is expected to ease market concerns, which had seen crude prices extend declines below $100 a barrel on Tuesday.
The East-West Pipeline is crucial for Saudi Arabia as it provides an alternative export route, allowing the kingdom to bypass the Strait of Hormuz. Before the recent attacks, Yanbu was exporting roughly 4 million to 4.5 million barrels per day (bpd), a significant increase from about 750,000 bpd before the war. The pipeline has a capacity of 7 million bpd, with about 2 million bpd typically going to refineries on the west coast, leaving a substantial volume for export. The disruption had also forced the 400,000 bpd SAMREF refinery at Yanbu to cut operations by half, with reduced rates expected to continue into October.
While pumping has resumed, it is at a reduced rate, with Saudi Aramco reportedly targeting around 4 million bpd as flows gradually rebuild. Satellite imagery has shown repairs and bypass construction at damaged pumping stations. Tanker loadings at Yanbu also appear to have restarted this week, though regular exports are still recovering. The pipeline's shutdown had previously led Saudi Aramco to inform some European refiners that they would not receive crude allocations in October under long-term agreements, impacting prices for European oil grades like Dated Brent, which had topped $130 at one point. For Asian customers, Aramco had been boosting supplies through the Strait of Hormuz, with supertankers carrying 14 million barrels of oil observed at Saudi export installations in the Gulf over the weekend.
The cost of using Yanbu has risen due to increased war-risk insurance, tripling in recent weeks to around 3% of a vessel's value from less than 1% in early July for Saudi-linked tankers. This means a premium of approximately $3 million for a single voyage for a $100 million tanker. Rates can reach 7% at more exposed Saudi ports further south. Although Hormuz remains more expensive at 6% to 9%, the security situation in the Red Sea has narrowed the cost difference between the two export routes.
